
Class _idJiUIlL 
Book -7 

Coi!yrigIitN»_.T!a^ 

CDEXRIGIfT DEPOSm 



SCIENCE OF 7ALUE 



NATURAL ECONOMIC LAW 



BY 

HENRY RAWIE 




BALTIMORE 

WILLIAMS & WILKINS CO. 

1920 






Copyright, 1920 

BY 

Henry Rawie 



StP -7 1320 
©C1,A597300 



PREFACE 

About thirty years ago I accidentally stumbled 
upon one of the most important truths in the 
world of science; the key to natural law in the 
social and economic world; the key to natural 
laws that control the growth of civilization. To 
unlock the door of science with the key was a 
work of research into millions of facts, — a work 
almost without end. 

Systems of finance and political economy have 
been built around a false premise, and no matter 
how logically a writer may have reasoned he could 
not arrive at a right conclusion from his false 
starting point, no progress was made in unravel- 
ing industrial problems, or in abolishing a slavery 
of labor since the time of Aristotle. 

The thinking world has been chasing solutions 
of labor and capital, money and wealth, for cen- 
turies, only to see one nation after another rise 
to wealth and power, to fall in ruin and barbarism. 

Taking a wrong starting point we travel ever 
so far and in any direction, but never at any right 
conclusion; such has been the case with our social 
and industrial problems. 

The wrong starting point is found in saying 
labor is the Cause of the Value of goods and of 
Property, and the market price is made by adding 
3 



4 PKEFACE 

up various costs of labor from producer to con- 
sumer. The self-evident fact is in plain sight, 
namely, instead of labor being the cause of value, 
labor cannot be employed in any line of produc- 
tion unless value will attach to the product in 
the market, unless more value will so attach 
than was spent as cost for labor. Value is the 
Cause of Labor. The occupation of labor is a 
result of market values. The common mistake 
is found in treating labor as a cause of value, 
treating value as an effect of labor in spite of 
milHons of self-evident facts to the contrary. 

Some years ago the Austrian School of Political 
Economy discovered the prevailing theory of 
value was wrong, and asked the question — "if 
labor is the cause of value what then is the cause 
of the value of labor! Will you chase value 
around a circle like a cat chasing its tail?'' The 
Austrian School produced a new theory of value 
seeking to find a cause of value outside of labor 
in what they called — marginal utility, but with 
no more success in solving problems than the 
theories they attacked, because value is itself a 
final cause. 

Labor works because value will attach to a 
product from some outside source, and it is not 
permitted to work unless more value will attach 
to a product in the market than the cost of such 
labor. The self-evident, true premise is just the 
reverse of the accepted theory. Value is the 



PREFACE 5 

primary economic cause, while labor is but one 
of its principal effects. Value has no cause the 
human mind may conceive; it is one of the great 
inscrutable creative powers of the Almighty under 
the control of natural law, like heat, light, elec- 
tricity, and life itself; we cannot discover its 
cause. 

Value is the cause of labor in all its many 
occupations. It has created the intelligent la- 
borer from the savage, and it has developed 
civilization as a living organism under a super- 
human plan of which man has ever been uncon- 
scious. Value directs the way labor must go, 
the way capital and wealth must develop, its 
laws come to us in the circulation of money. 

It may not be clear to the mind just how a 
natural law may compel labor to work at tasks 
it does not like, to work out a plan for the general 
good when it seeks only to gratify its selfish 
desires. But when we recognize the circulation 
of money as being value in action, under the 
control of natural law, it is not difficult to see 
that without money labor will starve in a civilized 
community, that the control over money by nat- 
ural law directs labor in the way it must go. 

The capitalist and employer has no such power 
over labor as he is given credit for having; he has 
no mine, or cave, or mint from which to draw 
unlimited supplies of money to pay impossible 
wages, which are limited and controlled by natu- 



6 PREFACE 

ral law. The employer must sell something that 
labor sends to market to get money to pay labor 
and sell it to the mass of consumers who are 
mainly the mass of laborers. What an employer 
will have labor produce is not decided by his 
own will and caprice; he has no control oVer the 
market price at which a product may sell, except 
to a very limited degree. What labor may pro- 
duce in great quantity and variety is decided by 
the world's markets, and by the circulation of 
money among consumers in each country. Prices 
in the world's markets being under control of 
natural law, it follows that prices in lesser markets 
are under similar control, but with more room 
for variation. 

Vast systems of natural law establish a general 
sea-level of prices and general rates of wages 
according to a standard of living which is the 
basis of every civilization. Such laws cover a 
world of facts, and are like laws of gravity that 
establish the weights of all things on the surface 
of the earth, and hold the sun and planets to 
their courses. 

The reader is not directly interested in the great 
general scheme of progress for the human race 
during centuries of the past, and for centuries 
of the future, but he is deeply concerned with 
the laws that fix the terms of his daily life, laws 
which distribute money upon which his daily 
life depends. 



PREFACE 7 

The individual finds his family life tied up to 
some general plan for the good of mankind, he 
is forced to suffer wars, panics, hard times, disease, 
poverty, vice, crime and insanity because human 
law fails to harmonize with the natural order, 
and he wants to know how the nation to which 
he belongs, may conform its own system of law 
to the world system of civilization. 

Because physical science has been quite suc- 
cessful in discovering and applying natural law, 
there seems the best of reasons to expect that 
science will discover and apply natural economic 
law, but to this day, all such efforts have resulted 
in total failure, and no discovery of a single law 
for natural order in the social world has been 
established. 

After natural economic law has been discovered, 
the failure, on the part of physical science, be- 
comes clear for the simple reason that economic 
laws relate to living things, to growth and move- 
ment of a social organism, while physical laws 
deal with the activity of non-living matter and 
forces. 

In the physical world, for example, a natural 
law fixing the weight of one cubic foot of any 
substance will give each minute particle of it the 
same proportion of weight, but such is not the 
case with living things; there is no such fixed 
relations between life and the substance with 
which life works. 



5 PREFACE 

In the social world prices are like weights and 
are under the control of a natural law like gravi- 
tation; yet the price of any class of goods may 
change in either direction, and must be permitted 
to change in either direction, and must meet 
demands for changes in the living organism. 
There is, for example, a natural law governing 
the length of human life, which probably controls 
the birth rate. By this law we calculate life 
insurance with great exactness and know almost 
to a day when the last member of a class of one 
hundred thousand insured will die, but we are 
helpless to say when any one of that group may 
die. 

General economic laws govern great masses 
of facts, which divide into classes under other 
laws, prices for each class of goods and different 
lines of goods and wages for different classes 
of labor seem outside the law, but are on the 
whole under its control. 

New York City, March, 1920. 



CONTENTS 

Chapter 1 
A World Disease 11 

Chapter 2 
Labor and Natural Law 27 

Chapter 3 
The Cost of Living 43 

Chapter 4 
Profit and Interest 63 

Chapter 5 
Credit Money 69 

Chapter 6 
Circulating Money 92 

Chapter 7 
Counterfeit Circulation 110 

Chapter 8 
Gold 127 

Chapter 9 
Banking 139 

Chapter 10 
Why Money is Stringent 163 

Chapter 11 

Parasite Evolution — A Theory of Development by 
Joy-Cells , 175 

9 



10 CONTENTS 

Chapter 12 
Landlordism 194 

Chapter 13 
The Way Out 213 



MTUEAL ECONOMIC LAW 

CHAPTER 1 
A World Disease 

Two very common sayings are used to excuse 
our faults, ''What we don't know can't hurt us'' 
and "We cannot lose what we never had," but 
in the most important affairs of life what hurts 
most is what we don't know, and we lose most by 
not getting what we never had. It becomes 
extremely difficult for a new science to tell the 
people what they don't know, and explain to 
them how they may get what they never had in 
the history of the world. 

When the Czar's Government in Russia was 
destroyed, together with its police system, courts 
and laws, its oppression and tyranny, the people 
were seeking — they knew not what — trying to 
recover what they never were permitted to have 
from the good things in life. 

The world was surprised at the quick revolu- 
tion in Russia overturning the autocracy of the 
Czar with so little loss of life, surprised at the 
failure of the ruling class, with an army in the 
field, to defend its power and privileges. 

The world rejoiced along with the wild rejoicing 
of the Russian people, at the prospect of creating 
11 



12 NATUKAL ECONOMIC LAW 

a new and beautiful world where misery had been 
the lot of tens of millions for centuries, to see 
liberty and plenty for its people, with the op- 
portunity to plan each life along lines of justice 
and happiness. 

In a short time the whole scene changed in 
Russia, and the world outside of Russia, stood 
aghast at unforeseen results, for something more 
than the old regime of the Czar had fallen; the 
structure of civilization was torn apart, the savage 
was no longer under the control of law and order. 

It is doubtful if any student of politics could 
have predicted the quick change of events in 
Russia after the first revolution, the civil war 
that followed from counter-revolutions seeking to 
put fatal theories in practice. 

What is the protective influence surrounding 
civilization that prevents looting of wealth, mur- 
der and wholesale crime? 

What gave way in Russia to unloose the Bar- 
barian brute in a vast population, to permit 
thousands to die from murder and starvation, 
and as many more from disease that otherwise 
would not have appeared? 

The Government of Lenine was not without 
a great ideal which it hoped to realize, although 
it must swim in blood of the common people to 
reach an end for Government. The ideal was 
to abolish private property, to make one common 
plan for the government of the whole world. 



A WORLD DISEASE 13 

which has been the religious ideal from the begin- 
ning of an organized church and system of 
religion. 

The ideal of Lenineism was to secure the rule 
of the moneyless man, although it would put 
an ignorant brute in power and give reign to 
all the thieving and murderous instincts of the 
dormant savage. What had fallen out in Russia 
was the long age institution of private property, 
upon which the circulation of money and the 
progress of mankind is based by natural law. 

It was not the rise of Lenine and Trotzky to 
power that destroyed private property in Russia, 
it was the abuse of private property under the 
Czar's Government, the failure of private property 
to carry forward its beneficent functions for the 
welfare of the masses; it was a concentration of 
wealth to a small class of absurdly rich property 
owners. 

A few in Russia realized it was not the mere 
rule of an aristocracy that was destroyed, but 
no one realized that a world's civilization was in 
danger of the torch, that private property, with 
its roots buried deep in the past, was to be torn 
out of the living body of the social organism. 

A few fanatics in Russia, as in other countries, 
preached a religion for the worker, promising 
wealth with ease and luxury, by taking wealth 
from the rich, and they found the ground pre- 
pared for a new religious crusade and for a new 



14 NATURAL ECONOMIC LAW 

form of government, with an army ready for the 
men who had courage to seize the power. 

A civil war against private property fills the 
world of property-owners, outside of Russia, with 
a fearful distrust in their own working classes, 
a fear that a similar crusade of religious fanatics 
cannot be kept from spreading over all other 
governments, and the greater the wealth, the 
greater the danger. 

Fanaticism in Russia is not led, as many sup- 
pose, by ignorant and brutal men; on the con- 
trary it called out leaders who had devoted their 
lives to a study of economic theory; men who 
were university graduates and library rats; men 
without business experience who spent years in 
the study of false and fatal theories of human 
affairs. 

There were many in Russia who owned small 
tracts of land, and other property, and the fanat- 
ics who sought to abolish capitalism, feared the 
small owners would rush to combine with those 
of great wealth, and would restore the capitalistic 
system. On this account there was a wide perse- 
cution and execution of all unbelievers against 
the new religion, who owned property, or who 
did not work with hands and muscle for daily 
wages. Murder by wholesale and famine which 
starved hundreds of thousands came to Russia 
as it has in other religious wars. 



A WORLD DISEASE 15 

The civilized world, outside of Russia, trembles 
in fear, not so much about what is taking place 
in that distracted land, because its misery should 
make all other people recoil from a like experi- 
ment, but in fear that other attempts at abolishing 
profits or experiments in Government ownership 
will have identical results. 

It is the chain of events in Russia all have 
reason to fear; the chain that once starting can- 
not be stayed until bloody revolution and its 
evil consequences have run their course of murder 
and pillage, when unbelievers in a new religion 
have been silenced or destroyed. 

Can this tidal wave, now pulsing among the 
laboring classes in all countries be held back 
in time? Can reforms that will satisfy the de- 
mands for the future, and satisfy the natural 
order, be instituted in time? or will the wealthy 
classes seek to hold the old order of unjust dis- 
tribution until civilization is buried in one com- 
mon grave of anarchy? 

The question in the mind of every student of 
today is, why the first revolutionary government 
of Kerensky, having the approval of a vast ma- 
jority of Russian people, could not maintain its 
power, with a great army in its control? Why 
it was overturned by a mere handful of fanatics 
led by a few sailors and soldiers? 

When a people hold a common belief concern- 
ing any fundamental institution, and by that 



16 NATURAL ECONOMIC LAW 

belief demand the institution shall be abolished, 
as was the case with the wealthy class in Russia, 
when property as the source of power has lost 
its usefulness in the body poHtic, vast changes 
may come from forces that seem of no importance 
at the time. 

A people come to believe a false theory about 
property on account of the contrast between the 
idle luxury of the rich and the hard lot of the 
toiling millions, on account of the failure of 
wealth to relieve the distress of common people, 
and they seek to destroy wealth which seems to 
be the cause of poverty among laborers. 

No one who has made a study of Socialism and 
its theory of capitalism, will deny that the present 
government of Lenine is putting such theories to 
a logical conclusion, and to a practical application 
in the affairs of government. In seeking to 
abolish capitalism the theory makes no distinction 
between the small owner and the millionaire; 
property as an institution is attacked, and if the 
small owner stands in the way he must be ex- 
terminated. 

Lenine and Trotzky have many faithful de- 
fenders in other countries, who recognize that 
owners will fight to retain their property. The 
small owner will fight harder than the few rich, 
and therefore they excuse the rivers of blood 
that flow in Russia and the famine that kills 
more than the war. It is the small owner who 



A WORLD DISEASE 17 

is the bulwark of private property; it is the 
failure to add to the number of small owners, 
when wealth concentrates, that brings the misery 
and discontent which ends in revolution. If 
private property is to be abolished on account 
of some fatal theory, then the small owner must 
be exterminated. Such is the logic of the theory 
of Socialism. 

What foundation belief combines millions into 
societies of socialists, anarchists and syndicalists 
over the world against the owners of private 
property, and against capital in private hands? 
The belief that men become rich by robbing the 
poor, by enslaving the vast body of workers, by 
denying them a living wage, forcing them to die 
before their time from over-work and underfeeding. 

Fanatics say the rich cannot be restrained by 
law because wealth is all powerful; it controls 
the state and it makes the law, hence the only 
salvation for labor is to abolish, not only the rich 
but all private owners of wealth and capital. 

According to theory when the cause of poverty 
has been abolished a Paradise for labor must 
automatically follow, and the defenders of Lenine 
over the world, seeing the completeness of his 
work of murder, and his control over property, 
decide that a Paradise has been secured in spite 
of truth and fact to the contrary. 

No one will deny that somehow the concen- 
tration of wealth to the hands of a small class 



18 NATURAL ECONOMIC LAW 

has been responsible for the downfall of civili- 
zation in the past. The same evil is now threat- 
ening all the world, and a just distribution of 
wealth to millions of small owners, is the true 
remedy. 

Admitting the concentration of wealth to a 
millionaire class is an evil that will destroy civili- 
zation; it does not follow that we cannot secure 
a natural and just distribution, and must make 
fatal experiments in government ownership. 

That the millionaire class must be abolished 
may be admitted; in fact, must be admitted if 
our civilization is to be saved, but ruthless changes 
of wealth can do no good and must work harm; 
we can only cure a long standing disease as fast 
as the patient may return to normal health. 

A rise of the savage to civil life came from the 
institution of private property, and from the fact 
that some land was more fertile than other land, 
which would give an easy living to its owner, 
but this difference in fertility is wholly ignored 
by socialist theories, although all progress and 
all life, human, animal, and vegetable depends 
upon it. 

When it was discovered that a simple cultiva- 
tion of the soil would greatly increase supplies 
and give more than the cultivator could himself 
consume, property took its root in the land; the 
land-owner became the lord of the earth, and 
slaves, captured in war, was the first labor to 



A WORLD DISEASE 19 

be forced to work the land for a master and 
employer. 

No matter how much capital and machinery 
a people may use, its use will depend upon the 
fact that only a small part of total labor need 
to work upon the fertile land and supply all the 
people with a living, that half the total labor 
may be employed at other work. 

The problem of the world has always been 
to j&nd work for the labor set free from providing 
its own living. When it was clear that fertile land 
under cultivation would give the owner a living 
without work, and would allow a surplus living 
with which to employ other labor, it followed that 
only fertile land would be used, and a margin 
of fertility was established which became the 
foundation of civilization. 

Lands must produce more than the living of 
the labor that improves and cultivates them, 
and poorer lands will not be cultivated; hence 
the labor, cut off from the land, must either work 
for the owner of fertile land, work poor land, or 
migrate. 

The land-lord controlled, not only the labor 
on his own land but also the labor that must live 
upon the surplus, and thus slavery was introduced 
by forcing savages to become laborers and provide 
an easy living for the property owner. 

Private property has its birth in slavery, war 
and murder, and is based upon the fertility of 



20 NATURAL ECONOMIC LAW 

soil, but natural social law was not then in power, 
and mankind was subject to the law of brute 
creation where the strong will take the life and 
living from the weak. 

It was a long time in the history of the world 
before any advance was made above land-owning 
laws and governments ; the church and state were 
all based upon the power given by land owning; 
the chiefs of state and church were rich landlords, 
while all the labor was slave, usually a conquered 
people, and even merchants and educated classes 
were long held as slaves. 

The owner of the land could not consume all 
the surplus living by his own demands, could 
not use it all by employing surplus labor to 
improve his land. Trade was developed to sup- 
ply the rich land-owning class with a higher 
standard of living, and thereby trade became a 
basis for the advance for civilization by making 
a better standard of living, the hope of enslaved 
laborer. 

The first natural law to assert its power is 
found in the cost of surplus labor to the land- 
owner, which cost creates a sea level price for 
a living, a cost level for all prices, both for goods 
and capital. 

When the landlord employed labor to build, 
or otherwise improve his land, the product of 
this surplus labor had a cost of two units of 
living; it cost the living of the labor working the 



A WORLD DISEASE 21 

fertile land and a living for the other labor cut 
off from the soil ; this fact made a price for goods 
and capital consists of two units of living, or 
two units of money cost, when money is limited 
to buying a living. 

The landlord had an enormous surplus he 
wished to exchange it for goods from other lands; 
and a cost of two units of living for other goods 
forced him to sell his surplus at a low price and 
from this market price profits were created. The 
low cost of surplus living from fertile lands meas- 
ured by two times cost in other goods made trade 
and commerce profitable and introduced money 
which could then pay for itself out of the gains 
or difference in costs from a variety of products. 

When money was introduced the power of the 
landlord over labor was divided with merchants, 
with money-lenders and with other employers 
because the natural law forced a price for surplus 
labor equal to two units of living. When the 
landlord could not himself employ surplus labor 
he had to pay the gain to other employers by the 
sale of his surplus at a price which gave two 
units of living and gave to other employers the 
same profit from labor the landlord himself 
received when improving his own land. 

In whatever form changes of government ap- 
peared in the past, from war or religion, land- 
owning was at the foundation, seeking to change 
the ownership of property from one class in power 



22 NATUEAL ECONOMIC LAW 

to the class-seeking power. The modern labor 
movement is the same force at work, seeking 
control over property for the power it confers, 
uniting millions by the hope that they at last 
will obtain the property and the power wealth 
confers on its owner. 

There is a natural law working at the founda- 
tion of every war and revolution, a law seeking 
to change the ownership of wealth, seeking to 
lift the mass of the people to a higher standard 
by forcing ownership to include more classes of 
people and to widen distribution until millions 
of families shall enjoy the blessings of wealth. 

Nature makes it plain to a stupid man that 
he can live with the least labor where the land 
is fertile and where the climate is favorable. 
Civilization concentrates population on belts of 
the most fertile lands in the most favorable 
climates, where the least work will provide the 
most abundant living. 

When money was introduced so that a people 
must buy its living with money, the natural law 
limited the quantity of money that buys a living, 
and forced money to divide labor into great classes 
one of which provided the total living, setting 
free one class with its living supplied from using 
the most fertile land. 

Two units of living had to be provided, one for 
the worker on the land, and a surplus for the 
worker cut off from the land, and thereby was 



A WORLD DISEASE 23 

created a sea-level standard price for all goods 
at two units of living, permitting one unit of 
living to measure what we call profit, and be 
equal to half the cost of living for the whole 
people. 

Here is where confusion in theory originates 
on account of the single labor cost of goods and 
the double cost of the same goods when two units 
of living must be supplied. 

If only the labor directly paid for producing 
goods is considered, it leaves other labor without 
hope of getting a living. Lawyers, government, 
servants, doctors, writers, printers, actors, artists, 
and the like would not be able to live unless the 
retail price of goods carried the money to buy 
a living for the workers who do not produce what 
they consume. 

When labor working in factories, on railways, 
street cars and the like claims all the money in 
wages which the public may pay for goods or 
service; such claim becomes impossible because 
the wages of other labor must be included in the 
market price, and must be separated from the 
cost by taking off what we call profit, which is 
but a measure of wages for other labor. 

When the socialist theory asserts that profits 
may be included in the wages of the worker, and 
when it seeks to have organized labor lift its 
wages to include profits, it puts other labor out 
of work, and puts the money out of circulation 
that would pay other labor. 



24 NATURAL ECONOMIC LAW 

The false wage theory of Lenine in Russia is 
the main cause of his failure to start industry. 
His radical attempts to pay the factory worker 
the whole selling price of the factory product 
and destroy profits of capital, succeeds only in 
destroying the wages of other labor along with 
idle factories and ruined industry. 

The railway, factory, and farm improvements 
of a country consume vast quantities of past labor 
that has been crystallized into what we call 
capital, but capital demands present labor, not 
only to operate it, but to keep it in repair, to 
rebuild and improve it, and to create new forms 
of capital. 

How is the city consumer who depends upon 
capital construction and capital operation, to buy 
his living with money unless the selling price 
of goods will hold the money in the city which 
its population must use to buy its living. 

The selling price of any labor product must 
be high enough above its own cost to include at 
least one other cost of living for the labor that 
has its living supplied. Buying from the market 
what labor sends to market demands that enough 
money must be provided to buy two equal shares. 
The money price in the market must carry the 
money with which all people buy goods; each 
class of goods must carry enough money to market 
them and carry the wages of other labor not 
paid for producing goods: 



A WORLD DISEASE 25 

If it is true that each class of goods must carry 
a price that will distribute money to buyers, 
where does capital come in? What part of the 
purchase money that buys a living does capital 
supply? If goods distribute all the money to 
buy goods why need capital employ labor? This 
is the socialist position, and for that reason they 
expect to abolish the capitalist. 

Capital does not now and never did employ 
the labor that sends goods to market. Labor 
employs labor by dividing into two great classes, 
one class producing all the living and the other 
class engaging at other work with money circu- 
lating to pay the wages for both classes independ- 
ent of capital. 

Capital brings past labor into cooperation with 
living labor which provides the living, and raw 
material for new construction. The value of 
past labor is most important in the progress of 
the world. If we advance above the savage, 
if we may have any leisure for higher things 
than a mere hand to mouth living, we must 
depend upon capital and upon the crystallized 
labor it brings into use. 

In the United States in the year 1919 there 
was at least two hundred and fifty billion dollars 
worth of past labor called capital cooperating with 
present labor. There is a daily force of two 
hundred and fifty billion dollars worth of past 
labor assisting one hundred million cost of present 



26 NATURAL ECONOMIC LAW 

labor each day; such is the power and importance 
of capital. 

But the SociaHst asks, — ''Shall the owner of 
capital enjoy the advantage of all this power 
without paying the past labor that produced 
capital?" The owner must pay labor according 
to natural law, but it cannot pay present labor; 
it can only pay through the distribution of wealth. 

Capital has little power over present labor, and 
that little consists in getting a living from present 
labor without working, by taking a part of the 
surplus living from fertile soil. 

Capital must pay labor, but must pay just as 
any buyer in the market pays for any labor 
product, — by buying it at its market price. In 
selling capital at a profit the natural law expects 
the demand for labor to become so great that 
wages will rise to a point where a surplus in wages 
will permit laborers to become the chief buyers 
of capital as they are the chief buyers of goods. 



CHAPTER 2 
Labor and Natural Law 

When a nation suffers from strikes, wars, revo- 
lution, panics and hard times, when millions can 
find no work, when money refuses to circulate, 
its people are made painfully aware of the fact 
that a higher power than government is in control 
over the great issues that make or break a nation. 
When a people suffer from some violation of 
economic law, many will be exempt, and for that 
reason we seem to be without law in the social 
world, for we think of natural law as being a 
system of exact relations between all of its parts, 
without exception to its rule. 

Natural law which governs the growth of living 
species from the lower forms of life, is now creating 
a higher man by means of what we call civiHza- 
tion, creating a new organism we call the body 
politic, and such natural laws for living things 
differ radically from natural physical laws gov- 
erning the non-living world. 

There is a very important difference between 
natural law in the physical world and the same 
law in the living world. The purpose of creating 
material things has been fulfilled, no more ma- 
terials are to be created, every chemical combina- 
27 



28 NATUKAL ECONOMIC LAW 

tion for all time is provided for, forces and sub- 
stances therefore have found fixed and unalterable 
relations. 

In the world of living things on the contrary, 
the Divine purpose has not been fulfilled and 
changes are in constant demand. We are born, 
live and die in countless numbers, and it may 
be that changes from birth and death are to 
bring forth an immortal man who will live an 
immortal life in the objective world. 

No man may doubt that his life and well being, 
so far as material comfort is concerned, depends 
upon a daily supply of money, to buy what he 
needs, but we are so familiar with daily spending 
that it passes without a thought, when in fact 
it is the greatest miracle of all time. 

The delight in spending money is the chief 
delight by which mankind has moved upward 
and forward in the rise of civilization. Spending 
money is the motive power of progress. Nature 
neglects no lure that will make the market more 
attractive to the spender, with the full knowl- 
edge that when spending becomes a passion, 
producing will take care of itself. 

The most important fact to get clearly in mind 
as we look upon the world is to see that spending 
money is the most important object in a man's 
life; without spending he dies, or becomes a 
savage. Spending money consists of two great 
quantities, which we may well call the money 



LABOK AND NATUKAL LAW 29 

for the rich and money for the poor. Money of 
the poor only comes to the man who works, and 
comes as daily wages, it consists in a supply of 
government coined or printed primary cash. The 
money of the rich, on the other hand, does not 
call for work or wages; it is money earned in the 
past, the value of which has been crystallized 
into capital that pays interest, rents or dividends. 

The owner of capital finds a great quantity 
of money at his command in the banks of a 
country by which he may convert past labor, 
or value of property, into the cash that will buy 
anything in the markets. 

One kind of money means a living for the 
spender by working for that living, while the 
other kind of money means a living by the spender 
without working, exchanging the work of past 
labor into a living derived from the present labor. 

A living is a thing of primary importance, and 
the money that buys that living is under the exact 
control of natural law. The operation of natural 
law for the circulation of government, or cash 
money needs, therefore, our first attention. 

The method by which money is forced to act 
its part in securing a living for workers is quite 
simple. A unit of money is a unit of value, and 
buys goods at an equal value; dollars worth of 
money for dollars worth of goods. 

The cash of any country, no matter whether 
it is gold or paper, has the same general law 



30 NATURAL ECONOMIC LAW 

behind its value; it goes into circulation on being 
paid out to labor of every description, from ditcher 
to Congressmen, and is then collected from that 
labor by the sale of goods and services consumed 
in living, it is money devoted to buying a living 
by working, and can buy nothing but the living. 

When a fixed quantity of money keeps repeat- 
ing its movements by being paid to laborers as 
wages and spent for goods over and over again, 
that money thereby establishes a system of meas- 
uring wages for labor and prices for goods. Cash 
money, in such case, is obeying a natural law, 
for all we can understand about a natural law, 
is that it comes down to us as a system which 
measures equal forces and equal units in equal 
times for certain ends. 

It is held, however, that units of money are 
not accurate measures, because costs of living 
change, and because prices vary in every possible 
way, but the whole quantity of money is a 
miraculous measure, and all the more wonderful 
by allowing changes in prices and wages, creating 
different foods which the body politic requires in 
its rise from a lower to a higher standard of 
civilization. 

When money is paid out to labor as wages, the 
fertility of soil will determine a certain division 
in that money; labor will not be employed and 
paid with money unless the soil it works will 
produce more than its cost of living. Money 



LABOR AND NATURAL LAW 31 

cannot be paid to other labor from the surplus 
of fertile land unless the product will sell for two 
units of living, one unit for the labor working 
the fertile land, and another unit for surplus 
labor. 

When money measures wages and prices, the 
natural law establishes a standard for all wages 
by a standard cost for all living, but leaves classes 
of wages and classes of prices free to move above 
or below an established standard, like waves on 
the fluid ocean rise or fall from winds of demand 
above or below sea level. 

When a quantity of cash is being paid out in 
wages and collected from labor in buying a living, 
that quantity will exactly measure the daily cost 
of living for all the people, and measure a daily 
wage to balance that cost of living. The function 
or circulation of cash is so limited, by natural 
law, that it can only pay itself out in total wages, 
which equal total cost of living, and use all the 
cash in so doing over and over again. 

Money cannot come into use until savage tribes 
have a settled existence, learn to cultivate the 
soil, to trade by barter with other tribes. The 
natural laws that govern the rise in species up to 
man controls until higher laws can begin to 
develop a social organism by which the brute 
enters into a spiritual and civil manhood. Tribal 
government must arise before value will appear 
to give strength to the tribe by making living 



32 NATURAL ECONOMIC LAW 

easier, from cultivating the soil, and from trad- 
ing with other tribes. 

When money appears, it will automatically 
divide slave labor working the fertile land into 
two classes, one class providing all the living and 
the goods consumed in living, while another class 
will work at other occupations. 

Money paid in wages seems to make no dis- 
tinction between laborers, yet when wage money 
is spent in the market, it will be found that half 
of it was paid to labor working fertile land, while 
another half was paid to labor of other kinds who 
buy the surplus from the fertile land. By this 
division of money into two parts, the soil provides 
two units in cost of living and fixes a margin of 
cultivation or fertility by making half the money 
cover the cost of all the living, and the other 
half create a selling price above that cost from 
which profits arise. 

When the whole quantity of cash is turning 
over as wages and is collected from the sale of 
a living, it follows that half the money is one 
cost of labor, and half is another cost; two dollars 
is paid to two classes of labor, one dollar being 
cost of living for two, the extra dollar being 
credited to the fertile land. 

When the market is reached the two dollars 
become a demand for living that has a cost of 
only one dollar to supply, and money measuring 
this demand will establish a sea level price for 



LABOR AND NATURAL LAW 33 

goods at two times cost measured by the wages 
of half the labor. 

All our attempts to establish a cost for any- 
class of goods in the market is bound to fail and 
may do great harm. No human mind has the 
power to calculate what any quantity of wheat, 
coal or oil has cost when it appears in the market 
where it must sell at a level price, coming from 
poor land or fertile land. 

Great differences in fertility of soil, coupled 
with differences in power of machinery and labor 
may make one bushel of wheat on the most fertile 
land cost one-tenth as much as a bushel from 
land less fertile, or one barrel of oil may cost 
fifty thousand times as much from a poor well 
as from a well flowing thousands of barrels each 
day. Whatever margins of profit appears in the 
market between cost and selling price, it is neces- 
sary to remember it measures a fertility of soil 
above a mere living. When all margins of profit 
have been collected the total sum above cost will 
just balance the cash that was paid to surplus 
labor which buys the surplus and in so buying 
establishes a price above cost. 

The price above cost must appear as profit 
because it separates the cost of living from the 
extra fertility of soil, and gives the surplus to a 
landowner, a gift having no labor cost. 

No matter how great this free margin of fertility 
may be in special cases, its purpose is to carry 



34 NATURAL ECONOMIC LAW 

extra supply of cash, and to distribute the extra 
cash to other labor that must buy the surplus, 
but must find other work to obtain the money to 
buy its living. 

When the Socialist attacks profits and would 
abolish them the fact should be called to his 
attention that he would abolish the inherent 
difference in soils, mines, and other natural 
resources, an impossible undertaking. 

The body politic is a great mass-man having 
immortal life, while its units of human life come 
and go by birth and death in countless numbers. 

The mass-man has a cost of living which it is 
the business of money to measure, making the 
living of each human depend upon the mass-living. 

The mass-man demands steel for railways, 
machinery, lumber and building material, chemi- 
cals and countless goods that no individual con- 
sumes, but which are nevertheless a cost of living 
for the body politic charged up in the market 
price of goods which each individual pays for. 

When oil carries a tremendous profit from a 
great difference in fertility of oil wells, such a 
profit only carries money because it can take the 
load the easiest and thereby distributes the money 
to the consumers of other goods. 

The body politic demands a certain quantity 
of oil, wheat, coal, steel and the like, for the 
organic living and a part of the total money is 
used for each need. 



LABOK AND NATURAL LAW 35 

The mass-man must have material for its living 
in quantities that change every day, and therefore 
the limit in quantity of cash money, forces de- 
mand to change from one commodity to another 
by changes in prices and profits and thereby keep 
the correct proportion in variety of supplies for 
the social organism. 

The money to buy wheat will pay for a given 
quantity each year at a standard price, and should 
the crop be short the same wheat money will pay 
a higher price for a short crop, but should organic 
needs demand an increasing supply of wheat, the 
price will rise by taking money that was buying 
something else, the price of which must fall. 

What can be more simple and clear than the 
simple manner in which cash measures the cost 
of living? What can be more stupid than the 
explanation given for changes in price by saying 
all prices and wages are regulated by a natural 
law of demand and supply. 

Demand and supply is the action and reaction 
of a given quantity of money, paying wages that 
buy a living and reacting in prices for that living, 
but it is always equal and always opposite, and is 
not a natural law but a truism, a mere balance 
of equal force. 

If a child were to ask what makes a railway 
train go, and the parent should reply it was by 
action and reaction, and the child would then 
ask what makes the railway train stop, and again 



36 NATUEAL ECONOMIC LAW 

it meets the same reply, — ''action and reaction," 
of course the child would be puzzled, and could 
not understand, so also are we all puzzled by 
the use made of supply and demand for expla- 
nations that do not explain. 

When the public wants to know what makes 
wheat rise above a previous price, the answer 
is demand and supply. What makes it fall? — 
''Demand and supply." Why do wages remain 
low for common labor? Answer — "Demand and 
supply." When a law is proposed an ignorant 
press will shriek, — "Beware you are meddling 
with the great natural law of demand and supply," 
it is the reply to all complaints, to all problems 

Is it any wonder the whole world is going mad 
with the failure of its intelligent classes to give 
the first glimmer of intelligence about social laws, 
about changes that must soon take place, braying 
like an obstinate mule concerning a so-called 
law of demand and supply? 

Ruskin saw the need of light when he said the 
present ignorance of the press concerning eco- 
nomic questions, and the readiness with which 
trivial explanations were accepted was the great- 
est disgrace to the intellect in all history. 

No matter what quantity of government or 
cash money a nation may have, it will act as 
a measure of the cost of living and then its func- 
tion ends. The quantity of money may be so 
low that only half the people will have work; it 



LABOR AND NATURAL LAW 37 

may be so poor in quality that trade will languish 
when it might be prosperous. The money a 
government must use will flow in the channel 
prepared for it without regard to human caprice 
or politics. 

If the money of a nation is properly employed, 
and is of equal units of value, its circulation will 
fix its own limits, and should that quantity be 
doubled, the greatest quantity will measure the 
same living by lifting prices of goods all around 
the circle, or by putting more labor at work to 
increase supplies at the old level of prices. 

The method by which a given quantity of 
government money fixes its own limits of circu- 
lation is quite simple, but it calls up most im- 
portant forces connected with the life of the body 
politic. 

In the United States, for example, at this time, 
— 1919, the total supply of government money is 
about five billion dollars, and the total number 
of wage earners about forty-five millions, and 
this supply may be used as the best illustration 
available. 

In the United States the circulation of govern- 
ment cash takes place by paying out a sum of 
one hundred million dollars every day in wages 
to about forty-five million laborers, scattering 
that money far and wide over the entire country. 

It is quite evident that the hundred million 
dollars paid out in one day cannot be collected 



38 NATURAL ECONOMIC LAW 

the same day from total labor by the sale of a 
living. If work is to be continuous a supply, or 
quantity, of primary government money must be 
on hand to keep paying a hundred million dollars 
day by day until the spending of forty-five mil- 
lion laborers will release that sum day by day 
to be used the following days, and close the circle 
of rotation. 

The five billion dollar quantity of United 
States cash takes about fifty days to saturate the 
demands for living money among all the people, 
it takes about fifty working days for the first 
day's supply to travel completely around the 
circle. 

While it appears that one day's supply of cash 
is taking its time to travel around the circle, the 
fact is that no time is given, but the quantity is 
made so great as to have a supply on hand at 
all times to instantly buy goods, and to instantly 
pay labor without waiting. 

By not allowing cash any time to circulate, 
it is forced to confine its functions to a simple 
channel of establishing a base standard of living, 
and a base rate of wages that will buy the total 
living. Money to supply raw material, to build 
capital, to distribute wealth and create a surplus 
for investment, must consist of another quantity 
known as bank credit. 

The circulation of standard cash becomes the 
base for all activity in the body politic. Each 



LABOR AND NATURAL LAW 39 

advance from a lower to a higher level comes from 
creating a higher living standard for the mass 
of the people, just as one species becomes higher 
than another in the scale, up to man, by having 
a higher standard of living prepared for it from 
lower species upon which it lives. 

The importance of not allowing cash any time 
for circulation must be kept in mind, because 
units of cash, in human hands, become vital 
units of life in the body politic, and although 
cash has no time given it to circulate, it pulsates 
with life like units of protoplasm in any highly 
developed species. 

The mind must get the fact clearly established 
that cash money measures daily existence, meas- 
ures a life force for the body politic which we call 
— Value — and which is required day by day, to 
provide a living for the social organism, just as 
protoplasm, endowed with life, sustains our own 
bodies. 

A daily sum of money pays for a daily ex- 
penditure of human life, and measures that human 
life by a daily consumption of goods taken from 
the markets. 

The purpose of money is not to merely allow 
a people to live, for, unless they conform to a 
plan of civilization, nature will sacrifice human 
life by millions before an acquired standard of 
civilization is given up, and before a return to 
barbarism will be permitted; the species is what 
nature seeks to preserve, not the individual man. 



40 NATURAL ECONOMIC LAW 

Money is something vastly greater than the 
mere units of exchange for goods which our parrot- 
like authorities assume it to be. A unit of money 
in the hands of a spender is superhuman, for 
then it is a unit of social life, endowed with 
a conscious purpose; it creates markets and a 
standard of living. 

In the very beginning of tribal existence, before 
money appeared the power to seize upon the most 
fertile lands became the most important power 
ever put into human hands, and has so remained 
to this day. The wars of civilization were fought 
to secure rich lands and other natural resources, 
and slavery arose to supply labor when a savage 
would not work unless he was made a slave. 

The moment land was put under cultivation 
its fertility jumped by leaps and bounds; a popu- 
lation could then largely increase, and profits 
from slaves, taken in war, soon created a wealthy 
class of land-owners, but when money appeared 
the power of the landlord was divided with 
merchants, employers, and money lenders, and 
bankers soon became ruling powers, on account 
of their control over money. 

In early tribal days when commodities were 
bartered and beads or cattle were used in trade 
as token money, such commodity money was not 
money in the sense we now use that term, but 
it is not easy to make the difference clear. 

Real money did not appear until shipping and 
commerce made trade extend beyond the local 



LABOR AND NATURAL LAW 41 

barter field, for then gold and silver began to 
perform functions in connection with credit that 
gave real money its first existence and its first 
circulation. 

In token forms, when a commodity was used 
in simple barter, the social body was of such a 
low order as to compare with the unorganized 
forms of life in the sea upon which the higher 
forms were after to live, but could not themselves 
develop into higher types. 

The money we use now is like cells of proto- 
plasm we call the uni-cellular life, the particular 
unit of life used to build up all animal bodies, 
cells that acquired a power to organize life into 
higher and higher types without any apparent 
change in the cell itself, it has immortal life; it 
lives and sub-divides, but has never perished 
since it first appeared. 

The unit of actual money has power to build 
a social body and to organize it, just as the cell 
of protoplasm has power to organize the material 
floating in sea water into millions of higher forms, 
all living on minute cells that have no such power. 

Money, therefore, had to develop in the cell 
form, and it could only do so after capital was 
united to commodity production which required 
credit to appear before money could be organized 
into units of living value. 

Credit appeared among merchants and ship 
owners before there was an established money, 



42 NATURAL ECONOMIC LAW 

because time is consumed in exchanging a surplus 
of one kind for another. A ship had to carry 
goods from one port to another, and credit must 
be estabhshed between goods the ship carried 
and the capital the ship itself represented estab- 
lishing a connection between present and past 
labor, a connection between ancestors and the 
living, which must be carried on to posterity. 

To make credit effective gold and silver played 
important parts because they supplied a material 
existence for an immaterial and abstract value, 
or bankers' credit. While credit will be taken up 
in a separate chapter it is necessary, before going 
into the more complex relations of money, to 
understand the very important part that a unit 
of money plays in organizing the body politic. 
We cannot separate units of money from the 
connection they must have with capital. Unless 
this connection is explained, it will appear that 
cash government money is a mere creation of 
law instead of being the most important product 
of evolution that has ever appeared on earth. 



CHAPTER 3 
The Cost of Living 

An oil well producing one-fifth of a barrel 
each day is pumped with profit; the labor cost 
is not too great for such poor soil producing oil, 
but another well may flow ten thousand barrels 
each day and have a labor cost per barrel fifty 
thousand times lower than the well on poor land, 
and bear in mind oil is included in our total cost 
of living. 

This difference in cost of oil, and all other 
goods as they appear in our markets arises from 
the fecundity of nature, and therefore no human 
law fixing costs or fixing selling prices, can do 
other than disturb the natural health of the body 
politic. The difficulty between labor and capital 
has its source in obstructing the natural regulation 
of prices and thereby interfering with the natural 
healthy functions of the body politic. 

The market concentrates all classes of goods 
into one great reservoir, so that each class must 
bid for a limited amount of money coming from 
wages of labor. Total wages of labor and total 
prices of goods must balance, but the wages of 
labor producing any one class of goods can never 
be made to balance with such cost, or with the 
market price of any particular class. 
43 



44 NATUEAL ECONOMIC LAW 

Wages of school teachers, lawyers, doctors, 
government employees and others must be car- 
ried in the selling price of goods, loaded upon 
goods as a price above cost, for unless the market 
price above cost will carry the wages of secondary 
labor, no money will circulate with which that 
labor can be employed. 

In a great pool we call the market, equal 
bushels of wheat must sell for equal sums of 
money, although the wheat from a field producing 
fifty bushels per acre will cost only one-fifth as 
much as wheat from a field producing ten bushels 
per acre. 

The most fertile oil wells and wheat fields 
will not supply the whole market; hence, poorer 
lands are called into use at higher costs, permit- 
ting the poorer lands to add to the supply, so 
that when the whole crop of wheat, and oil and 
other commodities are pooled the market will 
establish a sea-level price of two times labor 
cost, although particular barrels of oil or bushels 
of wheat may sell for a hundred times its labor 
cost. 

It should be quite clear that an employer of 
labor, or land-owner, must pay a living wage, 
before labor will work the land, and land of a 
lower fertility cannot command labor. The 
natural thereby law forces into use lands that 
will produce more than the living of its cultivators, 
and cuts off other labor from making its living 
upon the land. 



THE COST OF LIVING 45 

Unless the market was governed by some 
"standard of cost," and unless the money offering 
to buy will send prices above ''standard cost" 
to create a margin of profit, there would be no 
circulation of money, no trade, production would 
then be limited to supplying the land-owners 
with slave labor, leaving surplus labor to starve, 
or population to remain poor and sparse. 

The first action of natural law regulates the 
quantity and circulation of cash so as to estabUsh 
a standard cost for the market, and a standard 
price above this cost; and it secures this standard 
by forcing into use the most fertile lands, so 
that only a part of the total money will supply 
the total living. 

A standard cost of living becomes the basis 
of civilization and a nation remains at a low 
savage level when the standard of its living does 
not advance by multipljdng the quantity and 
variety of goods it will consume. The higher 
standard of civiUzation comes from creating more 
and more capital which increases the quantity 
and variety of goods and creates new appetites 
and desires to consume them. 

Standard cost, measured by the circulation of 
money is a very simple process, based upon the 
fact that labor when forced to work the most 
fertile land must have its living as the prime 
necessity of existence, and the rotation of cash 
is automatically limited by the cost of living, and 



46 NATURAL ECONOMIC LAW 

thereby fixes a cost of living which becomes 
'^standard cost" for the whole market. 

Natural law comes down to mankind in the 
form of exact measures which create exact stand- 
ards, the advance from lower to higher forms of 
social life is governed by standards of measure- 
ment, and our problems arise wholly from some 
interference of human law with the natural stand- 
ards for cost and for market price upon which 
progress is based. 

When cash is being paid to labor it measures 
labor cost, and it cannot become an exact measure 
unless each unit is of exactly the same value, not 
only for present time, but for future time within 
reasonable limits. Units of cash measure like 
any yard stick may be used to measure endless 
yards of every kind of material, the same units 
are used over and over again with no loss of time, 
so that the total supply of money paid out to 
labor will return and be used over again. 

It is not a difficult task to measure a definite 
quantity of labor and goods, when a people must 
spend money in order to live. The chief desire 
of mankind is to enjoy life and any people will 
spend more and more money for a better and 
better living until all the power of labor and 
capital is exhausted, in providing the best possible 
living. 

The primary quantity of cash in any country 
is one that will pay a standard rate of wages and 



THE COST OF LIVING 47 

buy a standard living fixed by the civilization of 
the time. 

The quantity of cash divides automatically by 
using the fertile land, taking the least cash to 
produce the greatest quantity of goods, and save 
both labor and money which must then be de- 
voted to the production of capital, to develop 
other natural resources of metal and mineral that 
capital must consume. 

Owners of the fertile lands soon discover that 
the surplus they obtain will be very much greater 
than they can spend in personal luxury, and it 
becomes a profit wherever lands can be improved 
with capital, or where trade and commerce may 
be extended. 

When a land-owner employs surplus labor to 
improve his land, or as his personal servants, his 
building labor will cost him two units of living, 
one for the labor that produces the living and 
another for the labor at otherwork; hence it follows 
automatically that the cost of secondary labor is 
always two times the standard, or average living. 

The fact that the employer must pay two times 
the cost of a standard living, sets a limit upon 
fertility, so that no land will employ labor unless 
its fertility will return two times the cost of labor 
at the minimum wage rate. 

A margin of cultivation once established divides 
the quantity of cash into two equal parts, allowing 
only one-haK to produce two times the living for 
half the labor, and sets aside one-half as surplus. 



48 NATURAL ECONOMIC LAW 

When money divides into two equal parts one- 
half the money will create the whole Kving, and 
the other half becomes wages for surplus labor 
that must buy the surplus from fertile soil, and 
can only do so by creating capital and by improv- 
ing lands. 

With the cost of living using the cash day after 
day, it is not material whether a part of the oil 
supply is produced at fifty thousand times the 
profit of another part for it is necessary to keep 
the whole supply of oil at price which will permit 
lands of lower fertility to supply the whole body 
politic with oil. 

Having soils a thousand times more fertile 
than the margin of cultivation requires, should 
rapidly increase wealth and capital and when 
machinery and capital are added to goods, wages 
and standard of living will advance rapidly. 

When capital is newly coming into existence, 
it is distributed as a gift from fertile land to 
merchants, land-owners, and money lenders. If 
this gift would come to an end when wealth is 
first created, and if the whole people were after- 
wards given an equal opportunity to obtain a 
share of the accumulated capital, then the gift 
of billions to fortunate or lucky owners would 
prove itself to be a blessing in which the industri- 
ous would share. 

Unfortunately, human law operates to prevent 
accumulated wealth from being distributed the 



THE COST OF LIVING 49 

same as goods are distributed so that each worker 
has an opportunity to get a standard share. In- 
stead of wealth going to its owners the first time 
and then being distributed the human law so 
operates as to hold gift wealth in the hands of a 
small class, and prevent its diffusion afterwards 
among the mass of people. 

When trade is mainly barter, and when money 
is a commodity there can be little advance in the 
standard of living above the savage, but when 
trade increases the variety of goods, and brings 
people into closer relations, natural resources over 
the whole earth are called into action, and civiliza- 
tion advances rapidly as wealth accumulates. 

When trade extends, when shipping and travel 
develop, when people are clothed and home brings 
its refinements, when cities grow, roads are built; 
when lands of many kinds are cultivated, then 
the proportion of capital compared to the cost 
of living will enormously increase and a nation 
should then employ all its labor at the highest 
possible rate of wages, and allow each to share 
in the accumulation of wealth. 

Growth and development of a nation is based 
upon a system of measuring by equal units of 
money, and unless the mind can grasp facts in 
great multitude and in great classes, the natural 
laws will be hard to understand. Money does not 
measure any concrete thing like a yard stick 
measures yards of cloth, which increases the 



50 NATURAL ECONOMIC LAW 

mental problem. Money measures a proportion 
of vital force attaching to material things in prices 
of goods and in wages of labor. 

Measuring force in connection with materials 
enables us to apply science to mechanics and 
accomplish wonderful results. In measuring 
weight we seem to be measuring a substance, just 
as measuring a price seems to be measuring a 
commodity, but weight, in fact, is a force of 
gravity, and price in fact is a force of value, both 
are governed by natural law which we recognize 
in weights but do not so recognize in prices. It is 
taken for granted when a man parts with money 
to buy goods, he is governed wholly by his ap- 
petite and by a desire for goods, but money is 
spent to build great bridges, railways, steam 
shovels, and other forms of capital for future use 
and for which there is no animal appetite, without 
such an expenditure for capital, a higher being 
than an animal-man could not develop. 

A man having a surplus of money above his 
living will spend it to bring him an increase of 
money, the same as he will employ labor on fertile 
lands to get more money than cost. The investor 
gets his increase of money from the "time" used 
when compared with the use of cash that cannot 
charge for ''time" consumed. 

We know that, by a law of gravity a stone will 
roll down hill and change its level because a 
force pulls it toward the center of the earth, and 



THE COST OF LIVING 51 

as simple as this rolling down hill may appear, 
the pressure that pulls a stone down causes all 
movements of force and material in our universe, 
and is the physical basis of all life as well as of 
all mechanical activity. 

Dollars of money move by a pressure of the 
same kind from a pull of value, or social gravity, 
which governs all industrial or spiritual activity, 
governs all development of science, education, 
capital, work and wages. The pressure by which 
money moves is a similar difference of levels like 
that by which a stone rolls down hill, a difference 
we know by the name of profit, a difference be- 
tween cost price and price above cost. 

Unless there is a difference of level between 
cost and price above cost, there could be no distri- 
bution of goods from the lands where labor 
works, trade and commerce could not come into 
existence. No matter how complex civiUzation 
may become with cities, factories, steam com- 
munication and electric communication, its com- 
plexity is controlled by pressure from costs and 
prices above cost, over the entire economic field, 
the same as gravity works over the whole physical 
and chemical field by similar differences in levels. 

Each and every dollar, to become an exact 
measure must be equal to every other dollar at 
any place, and for future as well as present time, 
and yet a dollar will have no social force unless 
it can move, and it will not move unless it has 



52 NATURAL ECONOMIC LAW 

a price above cost to make it move; it must sell 
for more than cost, before it will circulate. 

The puzzle which prevented an explanation of 
money, as a measure, is found in the fact that 
each dollar must have a fixed standard value, 
but yet must have power to change that value 
before it will circulate, but it gets this addition 
in prices by giving value to ''time" where goods 
must take "time" to move from producer to 
consumer. 

'Time" consumed adds to the value of a stand- 
ard dollar when measured separately by a circula- 
tion of credit money. "Time" saved by the labor 
of the past for the benefit of the present genera- 
tion is added to each dollar, so that it may sell 
for more than it cost. Why are dollars of interest 
so important that cash cannot circulate without 
them, move or perform its functions unless units 
of interest create a pressure or difference of level 
for money? Working is tiresome. A man will 
shirk hard work and seek an easy living without 
working. The laws of nature take advantage of 
this desire and create interest dollars which enable 
a man to live without work, and thereby creates 
an addition to the value of cash which pays only 
for present labor. 



CHAPTER 4 
Peofit and Interest 

The most astonishing fact the future historian 
will discover concerning the present time, will 
be a terrible wave of red anarchy and revolution 
coming from the failure, of governments, to solve 
its most elementary labor problems. 

The writer of the future will see an enormous 
accumulation of inherited wealth, crying aloud 
to be distributed to every man, a fund intended 
to relieve the world from want, fear and anxiety, 
to abolish poverty and secure permanent prosper- 
ity, and yet for centuries it created only trouble 
from its concentration. 

The red anarchist sees clearly enough that 
property should in some way relieve the world 
from poverty for otherwise civilization is an 
admitted failure, but he, along with so-called 
authorities and government officials, fails to see 
how simply the laws of nature would use the 
inherited wealth and compel its distribution to 
millions of families. 

It is quite plain to the man in thie street that 
if he inherits an estate, he may live upon it with- 
out working, either by selling it for money, or 
from the income if it is sufficient for that purpose. 

53 



54 NATURAL ECONOMIC LAW 

The great inheritance we call capital may not 
only descend to private owners, but if it passes 
to an ever increasing number of owners, the 
inheritance would so increase the income of com- 
mon laborer as to bring about its own distri- 
bution. 

The income to capital measures more than an 
easy living for its owner. Its most important 
function is to measure an amount of wealth each 
year to balance its income, and the greater the 
income the greater should be the share of labor 
from the distribution of wealth. 

Socialists realize, in their zeal for the welfare 
of common labor, the benefit from our tremendous 
accumulation of wealth see clearly it should raise 
the standard of living for the great mass of the 
people. 

But the theory of Socialism is unable to separate 
the value of land from the value of labor, or sepa- 
rate property in land from property in labor, and 
therefore it wholly mistakes the method by which 
wealth would be naturally distributed, and believe 
vainly that government ownership abolishing 
private property will in some mysterious way 
bring about the good results they hope for. 

Before we can solve the most simple problem, 
it is necessary to be able to state the problem 
itself, and to so state it that all men may see it 
alike, and not have a theory about it one may 
change to suit his own convictions or beliefs. 



PKOFIT AND INTEREST 55 

Let it be admitted as Socialists claim that 
wealth now owned by a capitalist class was pro- 
duced mainly by the common labor of the past, 
and was never paid for, that present owners 
secured wealth as a gift, and have no claim by 
which they can establish a better right to it than 
a gift. 

If it is admitted that wealth coming newly into 
existence becomes a gift to its first owner, under 
the natural law, such a gift does enormously 
encourage the rapid production and accumulation 
of wealth, and thereby in the end will justify 
the gift to its first owners. 

A gift of capital to a small class of owners is 
the real bone of contention in all labor disputes, 
is at the bottom of the world's unsolved problems 
between labor and capital. Owners will not 
admit the gift, and produce silly arguments about 
brains and ability bestowing wealth upon a better 
class, which only intensifies the feeling of wrong 
and prolongs an endless discussion. 

Granting, in the United States, that two hun- 
dred billion dollars of wealth was a gift to a class 
of less than one miUion families out of more than 
twenty million, that gift should have been a 
blessing in disguise by quickly increasing wages 
and by giving a higher standard of living, but 
it should subsequently be distributed to twenty 
million families. 



56 NATUKAL ECONOMIC LAW 

The problem properly stated is, wealth becom- 
ing a gift should not remain as a gift after it must 
be reproduced by labor, but it should then be paid 
for in such a way as to permit labor to acquire 
each year as much wealth as it must reproduce. 

We have a natural distribution of goods which 
does not allow them to concentrate to a few 
families, but disburses them to the mass of peopte; 
ninety-five per cent of the annual production 
being bought and consumed by the laboring class, 
while not five per cent of accumulated wealth 
goes to labor as a class. 

The natural plan by which goods are kept in 
channels of wide distribution should point to the 
natural law, whereby capital shall have a similar 
wide distribution. 

When goods are being bought by great masses 
of people, the money to buy was previously dis- 
tributed as wages in such quantity as would 
balance the goods, or otherwise the goods would 
have no market; the rich could not consume them. 

The distribution of goods demands a market 
price balanced by an equal quantity of money 
to make them liquid, and that money must be 
paid in such way that a joint ownership will 
arise for total goods and total money. Two 
equal owners of goods appear, one being labor 
which has in hand the total cash to exchange for 
the goods, the other being owners of the goods 
who seek to recover all the cash. Distribution 



PKOFIT AND INTEKEST 57 

cannot take place in any other way, and the 
joint ownership of money and goods is separated 
by a price of two times cost giving one time cost 
to each joint owner. 

As fast as goods are consumed the void between 
goods and money is immediately filled by goods 
in store, production keeping the supply of goods 
always equal to the supply of money, the market 
price being so elastic as to balance goods with 
money each instant of time. 

Making goods liquid so that tbtey may be dis- 
tributed in wages, and making money fluid so 
that it will be distributed in wages, does not mean 
that the whole stock of goods on hand need be 
sold at once for the whole stock of money on 
hand, but that only so much of the stock will 
be sold as labor can reproduce and is paid for 
reproducing each day. 

Capital is being reproduced in a quantity that 
is practically equal to the goods consumed each 
year but there is a failure in its distribution. The 
annual supply of capital fails utterly to be bal- 
anced by an equal supply of money so as to make 
capital liquid and exchange the same as goods 
exchange. 

Capital must have a selling price of two times 
cost to secure its required money the same as 
goods, in which case a joint ownership in -the 
stock of money will make capital liquid and allow 
the owners of the money to hold a half interest 



58 NATURAL ECONOMIC LAW 

in the annual supply of capital, and the owners 
of capital a half interest in the money to buy 
and distribute a fixed portion each year. 

But here value of land then comes into play, 
being able to take away a part of the money for 
capital. A cost for land is paid in advance of 
building, and by so doing the cost of land prevents 
capital from obtaining its standard price of two 
times cost, and prevents an accumulation of 
capital money that will balance the quantity of 
capital each year. 

If land could be consumed and reproduced the 
same as goods, the cost of land could be paid in 
advance and the price of land would hold money, 
the same as a similar price of goods. Land can 
have no cost in money, and the attempt to give 
it a cost is to deprive capital of the money it 
needs to make it liquid, and to deprive labor of 
the increase in wages to buy capital. 

The governments of the world have learned by 
costly experiments how to supply a quantity of 
standard cash having equal units of value; which 
will circulate under natural law, with man unable 
to interfere. 

Governments, however, cannot coin, circulate, 
or give value to credit money, it must evolve 
along with capital, and supply a quantity that 
grows as wealth accumulates. Credit money 
depends upon the "time" past labor is able to 
save the present generation by an accumulation 



PROFIT AND INTEREST 59 

of wealth, but the supply of credit can be inter- 
fered with by human legislation. 

The first great mathematical problem solved 
by primary money was to establish a base line 
by creating a margin of fertility below which 
the savage must live, but giving a higher life for 
all who will cultivate the soil, a base line to con- 
serve labor and permit half the money to pay 
labor for all the living and force half the money 
to employ other labor. On account of this base 
line half the vital force of labor is set aside for 
a continually advancing standard of living, which 
means an evolution of higher and higher types 
of social organism. 

By having half the money as surplus, trade 
develops by being able to take half the money as 
profit, and distributes a better living by increasing 
the quantity and variety of things to be consumed. 

Profit from goods is eaten up very quickly 
if nothing more is being produced than a living. 
It is soon discovered that building ships and 
having caravans to trade between populous na- 
tions will greatly increase profits and will create 
a rich class if lands are improved with slave labor, 
if houses and palaces appeared, if armies are 
maintained to protect cultivated lands, if cities 
developed with capital and commerce. 

A merchant spending profit money to build 
a ship instead of eating it up, will find he has 
doubled his profits, the gains from the ship will 



60 NATURAL ECONOMIC LAW 

not only return its cost, but will return the same 
proj&t as if it was secured from a stock of mer- 
chandise. A rate of profit will appear upon which 
the success of ship building and other enterprises 
will depend; if the ship will return its cost money 
in one year it will earn one hundred per cent upon 
its own cost. 

A merchant having a profit of one hundred per 
cent, being able to borrow money at twelve per 
cent, may rapidly increase his fleet of ships with 
borrowed credit until he discovers a limit in 
profit, which will cut the one hundred per cent 
rate until his fleet will pay a common or standard 
rate. 

The next important step in the arithmetic of 
money follows the circulation of cash, for although 
cash money buys the living, it could not circlilate 
until after credit appeared so that each dollar 
of cash could add the pennies of interest, by which 
it circulates or sells for more than cost and to 
measure interest was the second success of math- 
ematics in natural finance. 

Profit after supplying the basic living of the 
body politic creates new base lines for capital, 
a base line establishing a rate of profit, so that 
when capital will earn more than the base rate 
it will develop rapidly. Lands must be so 
fertile as to be above the base line before they 
will be improved with capital, therefore cities 
develop because profit from goods will concentrate 
in the small area when a city grows. 



PROFIT AND INTEREST 61 

By permitting interest money to buy a living 
without working, credit is thereby given its ut- 
most power to circulate, and is made more desir- 
able than cash which must be earned to buy a 
living. The whole circulation and value of money 
is made to depend upon units of interest and 
th,en interest will represent a new difference of 
levels or a new margin of fertility for the pro- 
duction of capital similar to the margin of fertiUty 
for goods. 

A base line for profit is created just the same 
as the base line for cost of goods, and it measures 
a price of two times cost for capital. The capital 
base line consists of the total cash profit taken 
from the sale of a living, being always fixed at 
half the cash spent for living, one-half the cash 
then becomes a base quantity of profit money, 
which will afterward create one or more dollars 
of credit for each dollar of cash profit. 

Money for building and improving land must 
be advanced before it can be returned by the sale 
of capital. 

Commerce will develop a rate of interest that 
carries goods from producer to consumer, and a 
commercial rate of interest will be much lower 
than profits obtained from capital, which will 
therefore have a great stimulus to create new 
capital paying four or more times commercial 
interest each year. 



62 NATUEAL ECONOMIC LAW 

When a ship will earn one hundred per cent 
a year, it could pay fifty per cent interest and 
return the loan at the end of a year, if ships had 
to be reproduced each year, they would be com- 
pelled to earn one hundred per cent so as to return 
the cost and interest each year. But a ship will 
last many years, and if its rate of profit is high it 
will have a high fecundity, so that a family of 
ships will grow from the profit one ship may collect 
to build other ships, but as the number of ships 
increase, the rate of profit must fall because 
total profit is limited to haK the money spent 
for a living, and cannot rise above that sum. 

If ships and other capital grow in quantity 
until they take up all the profit from goods, the 
rate of profit will be fixed by the amount of 
capital over which the total profit must spread. 
If total capital has a cost equal to half the cash, 
or equal to total profit the rate will be a hundred 
per cent, and a ship or other capital could double 
itself each year, but as soon as it doubled the 
rate would thereby be cut in half. 

Capital not being consumed as fast as labor 
may build it, will accumulate until it is many 
times greater than the total amount of profit 
money, because profit money is limited to half 
the cash spent for living. 

Since capital will last more than a year, the 
profit from a ship above its wear and tear may 
accumulate as credit, and can be used to increase 



PROFIT AND INTEREST 63 

the quantity of ships until a limit will be reached 
where the fall in the rate of profit and rise in 
rates of wages will prevent any further increase 
in the accumulation of wealth. 

When total capital collects a hundred per cent 
in one year, a base rate is established by which 
the total cost of capital is equal to total profit, 
or equal to half the cash spent for a year as cost 
of living. The rate of interest which must cover 
all the cash will then be fifty per cent and thereby 
cut each profit dollar in half to double the number 
of cash dollars that can collect interest, making 
every dollar of cash collect fifty cents of interest, 
while half cash is collecting one hundred per cent 
profit. 

If a merchant sells goods that cost one thousand 
for two thousand dollars, his profit will be one 
thousand for one thousand that is, cent per cent, 
but to spread the one thousand dollars profit 
over two thousand dollars of selling price cuts 
one hundred into fifty cents interest and a fifty 
per cent rate can be paid illustrating how a 
measure of interest takes place by natural law. 

Capital earning a hundred per cent profit will 
itself create a rate of interest at fifty per cent, 
and that rate of interest would then create a 
standard selling price for capital at two times 
its cost to balance an equal standard price for 
commodities at two times cost, again illustrating 
the basic measurement upon which all commercial 
and industrial activity depends. 



64 NATURAL ECONOMIC LAW 

When accumulated capital is equal to the cost 
of goods for a year, its rate will be a hundred 
per cent, but will drop to fifty per cent when the 
accumulation rises until total capital equals two 
times the cost of goods consumed in a year, and 
will fall to twenty-five per cent when total capi- 
tal accumulates to four times the cost of living for 
one year. 

When the rate of profit is very high and the 
rate of interest equally high at fifty per cent, 
only the very highest grade of fertile lands will 
command money to build at that rate, and must 
collect profit faster than interest will consume it, 
or capital will be considered a failure. 

The desire of men to double their wealth every 
year at cent per cent profit will greatly stimulate 
the growth of wealth; but the margin of cultiva- 
tion will begin to demonstrate how natural law 
governs the growth of wealth by the fall in the 
rate, for when total wealth greatly exceeds the 
cost of living for any one year, the fall in the rate 
comes by total profit being forced to spread thinly 
over a vast bulk of wealth. 

If all land could produce profits as great as 
one hundred per cent, the limit in quantity of 
profit acting against an increasing accumulation 
of capital would bring capital into competition 
for the limited amount of profit, and would cut 
the rate of profit so that the same limit in wealth 
would follow, no matter how fertile the soil or 



PROFIT AND INTEREST 65 

Other natural resources, the only difference being 
the rapidity in growth of wealth to its limit. 

Lands have different grades of fertility, and 
at the highest rate of profit only the highest 
grade lands will be improved, but as the rate is 
forced down by an increase in quantity of capital, 
the margin of cultivation widens all around the 
inner circfe, and when interest reaches its lowest 
rate, there will remain very little land so poor 
that cannot command some capital at the low 
rate, provided there is no cost of land to interfere. 

Capital could not grow to any great quantity 
by taking no more than the profit that will arise 
from fertile food lands, but it grows by adding 
new commodities from new resources so that 
capital increases its own profit by an increase in 
the standard of living for the whole people. 

The living of a people is not principally food, 
as we often decide without much thought, but 
becomes more and more of a spiritual nature as 
the type of social organism advances to higher 
levels. Railways demand consumers of travel, 
cities demand consumers of utilities in paved 
streets, sewers, hot and cold water; factories must 
have styles, colors and art to attract tremendous 
numbers of consumers for wearing apparel; schools, 
churches and amusements have their part to play 
in the total living, as have courts and government, 
the army, navy and police. 



66 NATUEAL ECONOMIC LAW 

Keeping the fact in mind that the quantity 
of capital grows until it is about ten times the 
annual cost of living, it should be plain that its 
own cost of maintenance might consume the whole 
of its income, and then production and consump- 
tion of capital will balance and wealth reaches 
its limit in quantity. 

Another fact to keep in mind is that dollars 
of profit must spread in thinner layers over a 
vast capital by a decline in the rate; total 
profit is absolutely limited by the sum labor 
must spend for its living, that any sum labor 
may save to become a bank deposit cannot create 
a market for goods. 

Capital reaches its goal in quantity when it 
consumes all the income it can collect by its cost 
of maintenance, and for this reason wealth may 
grow to an immense total without being distrib- 
uted to labor. 

When consumption and production of capital 
balance, the income is being consumed as fast 
as it is paid, at which time new wealth will not 
be created, but the old wealth on its fertile loca- 
tions should be subject to constant change in 
harmony with the progress of civilization. 

When capital accumulates in great quantity, 
while wages remain at a minimum level, wealth 
is forced to concentrate to merchants, manu- 
facturers, bankers and landowners who get capital 
as a gift from fertile soil or other natural resources. 



PKOFIT AND INTEREST 67 

Had the natural measure for capital not been 
interfered with permitting capital to sell at two 
times its cost, its distribution would have been 
provided for and labor would have secured its 
share of the total wealth in a market similar to 
the one distributing a living. 

When the cost of land was permitted to take 
up all the margin of fertility, then capital lost its 
quantity of money to buy a standard amount each 
year, at a standard price of two times cost. The 
rise in cost of land forced buildings to sell at one 
time cost instead of two times, and prevented the 
wage rate from rising above the cost of living. 

If a builder must pay a cost for land in advance 
of building, that cost for land destroys any 
profit from the sale of capital above cost by which 
wages might advance. When land has a cost 
money to buy capital cannot get into the great 
stream that pays wages, and, therefore capital 
remains the property of a rich class who receive 
it as a gift. 

Had capital been permitted to sell at its natural 
price then land would never have acquired a price, 
and fertility of location would merely have created 
greater quantities of capital upon the most fertile 
ground as civilization advanced, or collected a 
higher rate of profit from the better location. 

To build to the utmost advantage on the most 
fertile locations, capital must build into the air 



68 NATURAL ECONOMIC LAW 

instead of spreading over more grou^d, and the 
rent will increase when the building grows to 
twenty floors above the street, or until cost stops 
the rise in height. 

If a land-owner is permitted to take all profit 
above cost by a rise in the value of land he 
may demand five million dollars as cost of land 
in advance of a five million dollar building, and 
expect the builder to supply the building without 
profit, which he will not do. 

If capital is to become liquid, it must secure 
its own quantity of credit money, to buy as much 
capital as labor can reproduce each year, at two 
times its cost, and keep in circulation the quantity 
of credit money the capital market demands. 

Property in land need have no value or cost 
in money, and could not have such value or cost 
if the improvement upon the land was permitted 
to sell at its natural price of two times cost, and 
allow profit in building to take up the advantage 
of location. 



CHAPTER 5 
Credit Money 

If I were to ask ''What has been of the most 
absorbing interest to the human race in the rise 
of civiHzation?" the probable answer would be, 
"making profit money from production and trade 
over which wars have been fought and savage 
races were brought in contact with a higher 
life." 

The answer would not be correct, the most 
passionate interest in the mind of man, of a 
savage even, before trade and commerce develops, 
and which continues to be the most passionate 
interest now is to learn about some mysterious 
being he calls God, and his fear and duty toward 
that God. 

Discussion concerning a man's soul, concerning 
a life after death, a philosophy of things greater 
than the material, has been the most absorbing 
study of the thinking mind in all time. 

The reader, familiar with history, will readily 
admit that wars over religious opinion have been 
as bloody, as murderous, and have engaged more 
of the populations of the world than all other 
wars, and no war has been waged but some kind 
of a God was called upon to assist in overcoming 
the enemy. 



70 NATURAL ECONOMIC LAW 

The people of the world, in the rise from bar- 
barism, have been as passionate in changing the 
kind of god they worshipped as they have been 
in changing the kind of government under which 
they suffer, and the two passions advanced to- 
gether from a lower to a higher form of god, and 
from a lower to a higher form of government. 

Churches were built, embodying the highest 
form of architecture. The worship of religion 
was at the base of sculpture and painting; it 
had much to do with inventing the alphabet, with 
the introduction of writing and printing, while 
unbelievers, in an established religion, were as 
severely punished as were thieves, murderers or 
criminals. 

The evolution of a higher form of god has been 
as distinctly under the control of natural law as 
has been the evolution of species from lower to 
higher forms, or the evolution of the social organ- 
ism to higher and higher types, and the connection 
between the material and spiritual is never for a 
moment lost to sight by laws of evolution. 

The only difference I can find in the action of 
material over spiritual forces is a mere preponder- 
ance of one or the other at certain stages of 
development; at one point the material forces 
have control for a time, only to surrender that 
control to spiritual forces at another time, but 
at no time do either material or spiritual act 
without each other, or without combining. 



CREDIT MONEY 71 

Spiritual forces have as much to do with the 
development of species in organic life as have 
the material forces that assemble the material 
and build the form, for it is the spiritual that 
supervises the plan, that determines the form 
and develops the higher and higher usefulness 
of the form, bringing into existence the higher 
consciousness that inhabits the higher form of 
body in the advancing species. 

In our modern civilization the preponderance 
of spiritual, in one case, or material in the other, 
will be found in what we call capital structures 
which spirit forces control, while the mere assem- 
bling of material and suppljdng food is under 
material control. The spirit governs by what we 
may call the type of our civiHzation which we 
transmit to posterity, and inherit from ancestry; 
the material maintains the type without control 
over its form, structure or progress. 

A study of the body politic as a great living 
organism which covers the whole surface of the 
earth, including its soil and climate with all its 
vegetable, animal and himian life, is a vastly 
greater study than the biology of any single 
species. 

In a single organism the minute actions of 
single cells defy a microscope, while in the body 
politic the human being, when spending money, 
is acting under the same law as that which ani- 
mates a single microscopic cell, and, as a result, 



72 NATURAL ECONOMIC LAW 

life cells are multiplied a million fold, and we 
should be able to classify and analyze them, and 
discover their laws. 

The bodily structure of society consists of what 
we call capital, in farms, roads, towns and cities, 
and instead of trying to discover how an organ 
in a single species operates, we have in a city an 
organ to observe having similar functions, and 
obeying identical laws. 

The roads, rivers and oceans, together with 
railway systems connecting the cities are the 
great veins and arteries of the social organism 
by which blood, its food and raw material, carry- 
ing living cells of human life, circulates over the 
whole earth, and its electric lines and telephones 
become vital lines of nerve communication. 

Natural economic law controls the form and 
usefulness of every social structure, be it a simple 
dwelling of the laborer, a great factory, or lines 
of communication and transportation, the loca- 
tion and building of cities, as well as the develop- 
ment of agriculture. 

Man is forced to build according to a plan for 
the development of the human race centuries in 
the future, and this action of economic law is 
automatic, entirely outside of human control, or 
control by human legislation. 

Natural economic forces move according to a 
plan by laws that govern the value and circula- 
tion of money, and this power over money is one 



CREDIT MONEY 73 

that is not permitted to be interfered with by 
statute law, it has been our ignorance of the circu- 
lation of money that gives us our social problems. 

Human law may seek to regulate prices, pro- 
duction, wages, and all manner of human actions, 
but when the human law conflicts with the whole 
plan we discover that conflict by a failure in the 
circulation of money. Socialist or anarchist 
schemes may promise a heaven on earth, but 
find they can not deliver any part of their promise 
because money will refuse to circulate under their 
peculiar forms of government. 

We seem to consciously build our factory 
systems, our railways and farms and cities with- 
out regard to any general plan for the rise of 
civilization, and without regard to any special 
type of social organism, but what we build must 
conform to a demand made upon it by the circu- 
lation of money, from which the union and co- 
operation of social forces is secured. 

The value and circulation of money is held 
sacred by natural law, and held above any inter- 
ference with it by human law, both the material 
and spiritual forces use money to carry out the 
general plan for civilization. 

The circulation of money separates into two 
great streams according to what forces are in 
action, the material stream being under the cir- 
culation of cash money that supplies the living 
and raw material while spiritual forces govern 



74 NATURAL ECONOMIC LAW 

with credit money inherited from the past to 
determine the plan and form of the social organ- 
ism, but neither will act without the other. 

The difference between the material food supply 
and raw material consumed daily, and the spirit- 
ual capital or bodily structure, is that one supplies 
the daily life while the other holds the hereditary 
structure and plan of posterity for the future. 

The circulation of money holds in its grasp, 
not only the material life of a nation, day by day, 
but also holds its spiritual life and its future 
progress. It should not be difficult to see that 
problems of industry being both material and 
spiritual, must be the most complicated of any 
that science has to deal with. 

The connection between the material and the 
spiritual has prevented any real solution of social 
or industrial problems. When we fail to follow 
the natural order in our legislation, and in our 
distribution of wealth, the currency will at once 
register that failure by a faulty and crippled cir- 
culation of credit or spirit money, creating debts 
like creating disease to overcome some loss in 
circulation. 

The problems of circulation are difficult to 
explain for they are based on paying interest, 
and credit money is in fact a spirit money. Its 
units have no bodily or material existence, it is 
merely a book account in a bank, and circulates 
as a check or form of speech, and it may be con- 



CEEDIT MONEY 75 

verted into cash or material money on demand, 
it performs its purpose and is cancelled by cash. 

We are in the habit of beUeving the spiritual 
to be a separate existence above and outside of 
the material, while as a matter of fact it is the 
main guiding force of the living and material. 
Spiritual advance is under the control of natural 
law to the same extent that physical growth is 
controlled by law, they are inseparable; as closely 
connected as force and matter. 

In the structure of the body politic the influence 
of the spiritual is quite plain, for beauty, efficiency 
and utility of the highest order are the constant 
desire of mankind. The difference between an 
ugly poorly located building and a useful and 
beautiful one adapted to its location has its spirit 
influence upon a people. 

In the development of all the useful arts, 
beauty, combined with efficiency and utility, is 
ever being sought, and however fashions may 
seem to reverse this natural order, it is only as 
we sin by ugliness and materialism that we 
discover the ways of righteousness. 

It should be quite plain that the structure of 
the social organism must be fitted to a spirit 
plan, and must be able to change and advance 
according to that plan. The spiritual concerns 
man's life, both in this world, and his immortality, 
but how is a spirit form of every part of the social 



76 NATURAL ECONOMIC LAW 

structure to have its effect upon the human form 
and make changes in that structure? 

When the natural law makes it more profitable 
to build according to a general plan for beauty, 
then ugliness gives way in every field to art and 
structure changes are more and more spiritual 
as profits created from spirit money compel such 
changes. But how do such changes reach down 
to individual life? 

The capital structure of the body politic must 
somehow include both the spiritual and material, 
so that it may react upon the human body and 
mind, and secure the required changes that will 
develop the higher man according to a plan 
civilization is expected to work out. 

The spirit plan makes it more profitable to 
build for a high utility and beauty along with 
health than merely to build as any man may 
choose. The plan of civilization which develops 
a higher soul has in view a constant advance in 
the standard of living for the people, and accord- 
ing to this higher living, the human structure is 
expected to become more and more in harmony 
with the spirit forces that guide civilization. 

The common standard of living is quite distinct 
from what we are in the habit of considering as 
the standard found among the rich, which others 
seek to imitate — the natural standard — not for 
any man or class considers the future immortal 



CREDIT MONEY 77 

mass-man it is a standard for the body politic 
that consumes railways, cities and factories. 

Society develops its roads and railroads to 
increase the standard of living over the whole 
world for future time. It establishes cities upon 
a few great locations that remain city locations 
as one civilization is succeeded by another. 

Travel and transportation are important parts 
of a living as well as food and clothes, so is amuse- 
ment, in theatre and dance, and higher soul 
desires arise after we solve the easy problem of 
having an abundant supply of food. 

Capital, by its development, must conform to 
a certain plan and it develops on every side, by 
adding to and changing the standard of living 
to a higher and higher civilized type. Each type 
of social organism, or type of nation, is founded 
upon a standard of living, which the growth of 
capital and wealth has brought about for the good 
of the common man, and not for the exclusive 
benefit of the rich, as many writers seem to 
believe. 

History teaches that nations rise from bar- 
barism to wealth and power only to fall back 
into barbarism again, that populations grow in 
density only to fail when wealth is abundant. 

In the modern world of science and mechanics 
it is easy to point out how capital adds to the 
quantity and variety of goods and helps to sup- 



78 NATURAL ECONOMIC LAW 

port a much denser population, and supply a better 
living to a vastly greater number of people. 

But in the modern world great difficulty is 
found in distributing the better living which 
capital stands ready to provide; vast numbers 
are constantly out of employment, and other 
millions fail to get wages to buy a better living. 

The connection between the capital we accumu- 
late and inherit from the past, and the food we 
provide and consume every day is a connection 
between spiritual and material found in the daily 
living. 

The failure of civilization arises, when the 
spiritual fails, when credit money is confined to 
the goods market and when it merely makes a 
gift of capital to a small rich class, and fails to 
pay a rate of wages above the cost of living by 
which the mass would rise above the material 
into a beginning of spiritual life from owning 
property. 

It is not a difficult problem in mathematics 
to work out the quantity of credit money any 
given nation should have for its healthy normal 
development. The quantity of credit is based 
upon a proportion between total cash which 
buys a living and total wealth from which all 
higher desires arise. 



CREDIT MONEY 79 

The proportion of wealth in any country is 
always a fixed per cent of the annual cost of 
living. The quantity of credit is based upon the 
amount of cash that must be spent each year as 
cost of living, and as the standard of living in- 
creases, the quantity of both cash and credit must 
increase with it. 

It is plain that capital should in some way 
supply its own money to the general circulation; 
it should draw upon a revolving sum to pay its 
own costs and the cost of new building, pay its 
own dividends and profits. 

It is not easy to explain the circulation of 
credit money in relation to primary cash, explain 
how the credit circulation is kept separate from 
the cash circulation and is cancelled on being 
exchanged for cash. 

During the time a separate quantity of credit 
money is kept in circulation, and before it is 
exchanged for cash and cancelled, it will perform 
certain functions that are as important as the 
work done by cash. A man will have a bank 
credit calling for a certain sum to be paid him 
in cash on demand, and he may either exchange 
his bank credit for cash and consume it by living 
without working, or he may buy property from 
another who then merely takes his place at the 
bank, where the credit and the property will 
merely change owners. 



80 NATUEAL ECONOMIC LAW 

The exchange of bank credit for property ap- 
pears hke swapping jack-knives without special 
influence upon the general circulation of money, 
but, on the contrary, it has a most important 
influence, for it provides a permanent circulation 
of credit money each year without which modern 
civilization could not be carried on, the failure 
to buy and consume wealth brings about the 
downfall of nations from a concentration of 
wealth. 

If a man would sell his property he must find 
a buyer with money, a buyer with surplus credit. 
''We cannot have our cake and eat it too.'^ A 
man cannot buy property with the cash he must 
use to buy a living. If there is to be a permanent 
circulation of credit money, that will pass prop- 
erty from one generation of owners to another 
it must come from a bank check circulation. 
The owner of a bank account secures his credit 
either by what is called saving from wages, or 
from profits in business above all costs of living. 

The public has so long been in the habit of 
considering the capital of a country as the ex- 
clusive property of a rich class that it is diflacult 
to explain just how a failure to circulate credit 
money is responsible for this condition, and how 
a correct circulation of credit, under natural law, 
would supply the laborer with a surplus from 
which he would become a bank depositor and 
a buyer and consumer of capital. 



CREDIT MONEY 81 

When the statement is made that wages may- 
rise from an addition of credit money above 
the sum allowed to buy a living, the door seems 
to be wide open for an unlimited rise in wages 
and exclude any other class of property owners, 
such is not the case. 

Wages cannot rise above the cost of living 
unless profit money will create a credit circulation 
with which to pay the higher rates, and the fail- 
ure to secure this particular profit circulation is 
responsible for wages remaining at a rate that 
will only buy a living. 

Profits are exceedingly difficult to explain 
because they are based upon spirit, or credit 
money, that has no concrete or tangible existence, 
and are themselves limited by the wages spent 
for a living. Primary profits once appearing — 
from the circulation of cash buying a living — then 
the ''time" taken to cancel such profits for owners 
of capital should create another and secondary 
circulation of bank check currency and it is this 
secondary credit that should pay higher wages 
and permit the labor class to buy its share of 
total wealth. 

It is well-known that wages limit profits, and 
also profits limit wages. In special cases a man 
may pay out all his profits in higher wages, or 
wages may rise to destroy profits in a particular 
business, but total profits always equal half of 



82 NATURAL ECONOMIC LAW 

total wages and will increase as wages rise or 
decrease as wages fall. 

It is taken for granted that wages may rise at 
the expense of profits in all transactions where 
profits appear, but such is not the case; total 
profits cannot be reduced by a rise in total wages 
but must increase as wages rise and include half 
of total wages. 

Each dollar rise in wages should create one- 
half dollar of profit money by which the total 
consuming power is increased, permitting other 
buyers than laborers to appear who spend credit 
or profit money, and if unwise legislation reduces 
total profits in order to increase special wages 
for organized labor, then, for each loss of one 
dollar in primary profit, there will be a loss of 
two dollars in general wages, and the burden of 
such loss usually falls on the poorest paid and 
largest class of laborers. 

Banking depends upon a power to coin or 
create a secondary circulation of credit that is 
never cancelled, but is always reinstated by a 
new credit taking the place of one consumed. 
Secondary bank credit however has never been 
permitted to get into the general circulation, but 
has always been used to create debts that could 
not be paid, bringing about many kinds of 
financial and social distress. 

The quantity of permanent credit is based 
on the cash profit cancelled during a year's time, 



CREDIT MONEY 83 

and is expected to equal and balance the total 
amount of cash spent during a year. The limit, 
in total bank deposits — payable on demand — 
fixes the upper limit to wages, whereas cash sets 
the limit to minimum wages. 

Bank credit becomes a liquid currency when 
bank deposits once being spent are reproduced 
by the sale of capital at its standard price of 
two times cost. Bank deposit dollars cannot be 
used over and over again like cash, when once 
used they are cancelled and must be newly created. 
Failing in this respect, credit disappears from 
circulation after it creates a limit in debts that 
cannot be paid. 

The natural law will create new credit each 
year to replace the sums labor is expected to 
invest in capital, and such new credit must arise 
from a sale of capital at an established standard 
price of two times cost, the profit from the sale 
of capital being based upon the fertility of soil 
or location. 

Some locations will collect many times as much 
profit each year on each hundred dollars cost of 
capital as other locations, but there is no lack 
of fertile locations which may collect a greater 
rate of profit than the rate of interest, so that 
capital may always be sold at its natural standard 
price. 

When capital is permitted to improve fertile 
locations with no cost of land to interfere, two 



84 NATURAL ECONOMIC LAW 

times the rate of interest will naturally force 
capital to sell at two times cost, which creates a 
secondary profit to exactly balance the primary 
profit from the sale of a living. 

The demand for labor to build to the limit of 
rent at every location would exhaust the labor 
market, forcing wages to the maximum limit. 
Maximimi wages would overstep the quantity of 
cash which could only pay half the maximum 
rate and deposit credit would then be forced into 
the wage circulation to meet a deficiency of cash. 

The natural law secures a credit circulation by 
a system of measurement that is very complex, 
involving three scales of measuring at the same 
time so as to establish a rate of interest upon 
which the entire circulation must finally rest. 
The natural measurement of capital at two times 
its cost has always been interfered by laws which 
permit fertile lands to sell for money thereby 
converting the profit intended to develop capital 
into a cost for the land. 

By the first scale or simple measurement cash is 
paid out to labor, and forces into use the fertile 
lands. Cash, going into circulation, is paid to two 
times as many consumers as need to produce the 
living, and when the cash is spent it will automa- 
tically establish a selling price for the living, at 
two times cost. The fluid money will allow any 



CREDIT MONEY 85 

particular commodity to get a price either above 
or below the standard, the measurement being 
used only to establish a base line for prices and 
a basic cost for all production either of goods 
or capital. 

The moment cash establishes a standard market 
price of two times cost, the second scale immedi- 
ately measures out profit money from the fertile 
land, by the price above cost being made equal 
to half the total cash spent for a living. 

Profit arises wholly from the fact that labor, 
which has been set free by using only the most 
fertile lands, must be saved to be employed at 
other work; otherwise, the mere price above cost 
becomes a damage rather than a benefit. 

If natural law did not provide and offer some 
other field for surplus labor than to merely dis- 
tribute a greater quantity and variety of living, 
the gain from profits would be of doubtful benefit 
and therefore a third scale of measurement is 
required. 

It soon appears to the merchants in selling 
goods, that the quantity sold at the least cost, 
will create a profit by sale in quantity, thereby 
gaining a sum which represents the wages spent 
by the labor not calculated as a part of the cost 
of goods. 

Profits invested in capital become a double 
gain because capital returns its own cost and 



86 NATURAL ECONOMIC LAW 

pays interest besides, the fertile lands that grow 
capital are therefore in great demand and cities 
grow with astonishing rapidity upon a few select 
locations over the civilized earth, because con- 
sumers concentrate there and vast quantities of 
goods may be sold at the least cost for distribution. 

Commerce established a rate of interest for the 
use of credit money before coined money or 
capital appeared, and a new measure arose for 
fertihty, that may be improved with capital 
and thereby completed the scale of measurement 
when interest was set aside from profits. If, for 
example, the rate of interest is twenty-five per 
cent before capital appears, this rate will represent 
the cost of money to build capital, wholly inde- 
pendent of its cost in labor. A rate of interest 
at twenty-five per cent means that '^time'^ has 
entered into financial calculations, and a new and 
secondary circulation of money has made its 
appearance, which must have more than one 
year's time to return the cost of capital. 

If the land to be built upon can collect no more 
than twenty-five per cent profit, when the rate 
of interest is twenty-five per cent, it will follow 
that the cost will never be recovered, and fertility 
at that location is too low to be improved. 

The builder must have an equal field in which 
to borrow with the merchant, who not only pays 
the current rate of interest on the cost of his 



CREDIT MONEY 87 

goods, but who gets back his investment the 
moment the goods are sold. Money invested as 
capital must not only collect the current rate of 
interest, but must also collect the principal within 
a given time which is fixed by the rate of interest. 

The difference between the return of money 
invested for capital purposes and money buying 
goods is a difference in time, the merchant may 
recover his principal one or more times each 
year besides interest and profit, but capital must 
have a term of years. 

A rate of interest at twenty-five per cent 
establishes a time during which the principal of 
capital must return in addition to interest, and 
no matter how low the rate may fall below twenty- 
five per cent, the fall merely extends the time of 
returning capital money, leaving capital itself as 
a clear gain to its owner by its collecting profits 
of no less than two times the rate of interest. 

At twenty-five per cent interest, four years 
must elapse before the interest will equal the 
principal, and to return the principal within the 
same time, capital must collect fifty per cent 
profit each year. 

When capital sells for two times cost, the profit 
from its production and sale will be the same as 
the profit from the sale of goods, and the wages 
capital pays above a living should balance the 
cash wage, that only buys a living. 



88 NATURAL ECONOMIC LAW 

The rate of profit is divided into two equal 
parts, by making the rate of interest half the rate 
of profit. One-half of the profit is permitted to 
pay the cost of capital, just like one-half the cash 
is permitted to pay the cost of goods, and the 
division of profit into two equal parts forces into 
use the most fertile lands to get the required profit. 

Any single class of goods can get as much of 
the total cash as its particular demand can attract 
against all other demands, and any particular 
location can get as much of the total profit as it 
may attract, each location has its limit in profit 
for the capital that may improve it just as other 
fertile land has a limit in its productiveness. 

When capital is beginning its development, the 
profit derived from cheap construction will be 
high, because there will be little cost for land and 
total profit on living will establish a high rate of 
profit upon a small quantity of capital, to thereby 
greatly stimulate building if land values did not 
quickly rise to destroy the builders' profit. 

In the early development of new capital, and 
following the growth of science, the rate of 
profit is very high, and will, like the atuomobile 
business, permit the capitalist owners to develop 
tremendous plants and accmnulate great wealth 
from profits and with no loss to labor or to other 
capital. 

It will be admitted, without argument, that 
the growth of the automobile industry in the 



CREDIT MONEY 89 

United States in less than a generation, creating 
more than a billion dollars of new wealth, did 
not take any money or credit from any other 
line of business, did not lower wages, but did 
add money and more wages to every line of 
business, although the average profit was more 
than a hundred a year per cent during the period 
of growth. 

Automobiles were sold to the owners of surplus 
bank deposits and therefore did not take up any 
appreciable money from any other business, bank 
deposit credit was exchanged for the cash that 
built the plants, bought the material, paid the 
labor creating new wealth instead of lying idle 
and dormant in banks to create debts which 
would consume interest without paying wages or 
building capital. 

The average rate of profit is a measure of the 
proportion existing between the total sum paid 
for a living each year by all the people, and the 
total wealth accumulated from the past. If 
total wealth is equal only to the annual cost of 
living, a base rate of profit will be one hundred 
per cent and the rate of interest fifty per cent; 
if the quantity becomes two times the total living 
for a year the base rate will fall to fifty and 
interest to twenty-five per cent and the lowest 
limit of interest appears to be reached when total 
wealth is ten times the total annual living, the 



90 NATUBAL ECONOMIC LAW 

base rate of profit becoming ten per cent, with a 
base rate of interest at five per cent. 

When a small cost of capital can collect one 
hundred per cent on a fertile location, and interest 
is five per cent, there is great inducement to 
build at greater cost to profit from the higher 
selling price, to tear down and replace the cheap 
structure with better ones that will collect more 
gross rent and sell for a much greater sum of 
money. Capital should increase in quantity very 
rapidly as the rate of interest declines, and would 
do so if its profit was not taken up by a rise in 
cost of land which destroys the advantage of 
fertility upon the best locations. 

When total capital reaches about ten times the 
annual cost of living, it will be consuming, by 
its own cost, all the profit it can collect from the 
sale of goods, and unless wages will rise so that 
rent is directly paid from capital money, wealth 
will become a burden to its owner; capital will 
fall in ruin and serious trouble is at hand for a 
whole nation. 

Our land laws do not now permit capital to 
sell above a cost fixed by a minimum rate of 
wages, because the cost of land takes up the 
price of capital above minimum wages, and 
capital cannot therefore create a quantity and 
circulation of its own money by selUng at two 
times its labor cost. 



CREDIT MONEY 91 

The remedy will come when we force capital 
to sell at its natural price with land acting as 
the foundation for capital without having a money 
value. We will accomplish this result by simply 
refusing to make loans, with land value as security, 
limiting all loans to the cost of building, and make 
all securities payable like bank deposits in cash 
on demand, and have such payment protected by 
the required reserve for each corporation or 
structure. 



CHAPTER 6 
Circulating Money 

How many thousands of years the human 
animal remained stupid to the subhme moving 
picture of the changing seasons we may only 
guess, but finally, the great miracle of spring, 
summer, autumn, and winter, the growth of 
vegetable life under his feet, and the perils of 
wild animals, did impress the human savage and 
he began to cultivate the soil, to tame wild ani- 
mals, and make a step in a long chain of progress. 

When the soil was stirred with a crooked 
stick, its yield was increased, and mankind began 
directing certain natural forces that before were 
undirected by human hands. By directing forces 
of growth a man could obtain advantages for 
himself that another man did not get from the 
free supplies of nature, population could largely 
increase above what nature, undirected, would 
supply with a living. 

There arose, for the benefit of certain tribes 
or classes of men, a new fecundity of the earth 
that was to become the source of a new and 
higher type of mankind, enabling the race to ad- 
vance step by step as more and more of the earth 
was explored and cultivated, and as more and 



CIRCULATING MONEY 93 

more natural forces were directed for the benefit 
of mankind. 

The rise of intelligence, above that of the brute, 
is based upon gains of an easy living that come 
from directing labor to produce an increase that 
would not appear without intelligence. The 
power to direct natural forces, however slight, 
contained germs of all the higher mental and 
spiritual powers of man for the power to direct is 
a spiritual power, higher than any of the physical 
or vital forces that animate the world. 

Although the greed of the savage was the 
foundation for subduing the powers of nature, 
although an easy living to some, with slavery for 
many was at the base of a pyramid for higher 
powers of intelligence than the brute, yet by so 
founding the advance of man upon savage greed, 
it could not fail, for thereby was planted in the 
mind of savages a dawning intelligence, a growing 
sympathy for the oppressed and a love for all 
mankind. 

If we could discover a law by which minute 
particles of protoplasm bring about a great variety 
of living forms, it would doubtless be found that 
each unit, besides being alive, had also the power 
to appreciate the fact of its being alive, and by 
combining and organizing such units, the joy or 
appreciation of living was increased, for an organ- 
ized collection of cell life. 



94 NATUKAL ECONOMIC LAW 

The protoplasmic units are compelled to com- 
bine in certain ways, determined by laws of 
growth which limited the joy they might receive, 
but permitted them to secure more and more 
satisfaction as they developed into higher and 
higher organisms. 

In a similar way when savages unite into tribes 
the tribes soon began to cultivate the soil. The 
first simple organization of savages creates 
another social unit, a unit of gain in a higher life, 
not only for the tribe itself, but a gain that is 
communicated by the tribe to each member; the 
tribe is more powerful than any savage, and any 
member of a tribe is more secure than a savage 
unattached to a tribe. 

Belonging to a powerful tribe gave security 
and personal pride to each of its units; it gave 
birth to a new kind of appreciation of life, a 
tribal life. Each member could no longer act 
in utter savage selfishness, but had to consider 
whether or not the tribe would approve or con- 
demn his acts, a new consciousness of life was 
born, a tribal consciousness. 

With the tribe life began a dawning appre- 
ciation of a higher type of social organism which 
was for the benefit of a higher individual man. 
The gains that came from the fecundity of nature, 
upon which the power of the tribe was based, 
were gains that made differences and distinctions 
between individual members of the tribe. 



CIECULATING MONEY 95 

The wealth that arose represented a gain in 
social power; it became a measure of what the 
individual could procure on account of the tribe 
to which he belonged, over and above what 
otherwise he might procure without the help of 
that simple organism. 

The unit of tribal power, became a unit of 
value attaching to wealth that accumulated, and 
although wealth became the means of setting 
apart one class of the same people from another, 
and became a cause of advancing one nation or 
tribe greatly beyond the power of other nations, 
yet a nation could not advance unless the living 
for its people was made easier and happier. 

Social power was contained in units of money, 
so that the whole vital force may be used to de- 
velop all the parts of a greater life for a whole 
people. Units of money become like living units 
of protoplasm, building up millions of forms of 
living things, each of a higher order, containing 
more organized units of appreciation or conscious- 
ness of life than the lower forms. 

Money acts like living protoplasm in the social 
organism. Its single units may be distributed 
to vastly different kinds of life within the whole, 
just as units of protoplasm creates myriads of 
different living things necessary to the higher 
types. 

The dollar of money creates a wheat crop, rye, 
or corn or cotton crop, by having certain units 



96 NATURAL ECONOMIC LAW 

of profit, or units of a higher appreciation of 
life to distribute, and while we may recognize 
wheat value as being distinct from corn, or rye 
yet the unit of value in the dollar has no such 
difference. 

The power to direct the fertility of the soil 
so that it will produce its right proportions of 
wheat, rye and cotton, as well as thousands of 
other things, is held in the power to direct dollars 
of money, to employ labor with money, to buy 
material, and to build according to a certain unit 
of profit that money carries, which determines 
just what amount and what kind of production 
may be carried on for the general welfare. 

The fact that labor will not be employed with 
money, or that goods or capital will not be pro- 
duced unless each dollar of cost has added to 
it a certain amount of profit, greatly complicates 
the problem of its circulation. 

When a ship is built it is found to have an 
hereditary life, which is to say it was developed 
by a process of evolution from a hollow log, which 
was its ancestor, and it improved by slow stages. 
Each advance from a hollow log to the modern 
palatial steam and electric ship was controlled 
by the small element of gain that money would 
give to every dollar of commerce. 

When the steamship, as we now have it, ap- 
peared, the gains that were required to create 
it from the hollow log did not disappear, but 



CIRCULATING MONEY 97 

remained to reproduce the modern ship, which 
has its own proportionate part of the annual gain 
according to a hereditary share. 

What compHcates profits is the fact that they 
are units of hereditary Hfe we get from ancestors, 
and are not anything the living may take credit 
for producing, and at this point all prevailing 
theories are gravely at fault in asserting that 
profit is a loss to the workers who appear to pay 
it by an increase in cost of living. 

We advance from lower to higher stages of 
civilization only as we learn to cultivate more 
soil and more kinds of soil, to open mines, to 
develop minerals and metals, to build farms, 
towns and cities, all of which capital accumulates 
from the past, but it gives an enormous surplus 
without cost to present labor. 

The great benefits from civilization do not 
come from ''labor," as we commonly use that 
term — meaning present-time-labor — but come 
mainly from the accumulation of past-time-labor, 
without which present labor could not support 
half the population at a very much lower standard 
of Hving. 

Civilization consists of a high structure of 
capital that has functions and organs for the 
body politic, just as our own complicated bodies 
have organs and functions to carry on the mani- 
fold activities of human life. 



98 NATURAL ECONOMIC LAW 

We depend upon an accumulation of wealth 
from the past, upon an accumulation of knowl- 
edge and intelligence from the past, upon institu- 
tions of goverjmient, education, religion, law and 
order inherited from the past; these we reproduce 
in the whole body politic, according to laws of 
inheritance, as each family must reproduce itself 
in its children, and depend upon laws of heredity. 

This heredity reproduction, not only of the 
wealth we possess, but of the education we must 
preserve and improve; the arts and industries 
must not be forgotten. 

The whole body politic must be reproduced 
according to an hereditary plan, and keep im- 
proving upon that plan, the circulation of 
money demands the reproduction of all we get 
from the past, which we must improve and trans- 
mit to posterity, and for that reason circulation 
of money is not easy to explain, carrying out this 
superhuman, this Divine and most intricate plan. 

Keeping the fact in view that tomorrow morn- 
ing we inherit billions of wealth from the past, 
but must produce each day what we consume 
in living, it should not be difficult to keep separate 
in the mind, the fixed capital that may be sold 
by its owner for a future living, from the goods 
that must be provided as fast as they are con- 
sumed. 

This separation of past-labor from present- 
labor, future living from present living, inherit- 



CIRCULATING MONEY 99 

ance from life itself, is provided for in having two 
distinct and separate circulations of money-cash 
money and credit money, cash being confined 
to merely paying for and buying the living day 
by day, while credit converts past labor, or 
capital, into cash when it would be spent to live 
upon. 

It is not easy to explain how two separate kinds 
of money can move side by side, each dollar 
being of equal value, and yet be held in different 
channels that do not interfere, but such is the 
case, and it makes the complication and mystery 
of money. 

Probably the most difficult single fact to get 
clearly in mind, about the circulation of money, 
is that cash money, consisting of all government 
coined paper or gold, is a primary money that is 
confined to a very narrow channel of buying the 
living each day, and of measuring the cost of 
living. 

Other buying must take place with credit 
money which governments have no power to 
coin, no control over its quantity, its value or 
circulation, it being held outside of human inter- 
ference by natural law. 

A supply of government money will regulate 
the quantity of credit by the amount of interest 
it will pay on each dollar of cash collected from 
the cost of living, and by a rate of interest which 
divides dollars of profit into smaller units. 



100 NATURAL ECONOMIC LAW 

The difficulty in realizing just why cash is 
strictly confined to buying the living for all the 
people, rich and poor, why it is limited to measur- 
ing the cost of production, comes from the fact 
that no good reason appears for such restriction. 

It seems to any man that he need not spend 
all the cash he receives for living, but may ac- 
cumulate cash and buy anything with the surplus. 
Although one man may accumulate a small cash 
surplus, millions cannot do with all the cash, 
what one man may do with an insignificant part 
of it. 

A total quantity of cash is coined by a govern- 
ment to be paid out in daily wages as cost of 
labor and only as much will be paid each day as 
will be spent; what is paid one day cannot be 
spent the same day, therefore the total quantity 
will divide into sums of daily wages, until pockets 
are saturated, and until as much is spent each 
day as will pay for living the following day. 

The market demands a quantity of cash that 
will be able to pay on the spot, a quantity of 
cash to balance the supply of goods in store, so 
that no time will be consumed by waiting on 
a circulation of cash. 

The whole quantity divides into about sixty 
days' supply, and while one day's cash is being 
used fifty-nine days will collect in pools, waiting 
its turn to pay wages and buy a living, and any 
man may accumulate a small part of this pool 
of cash. 



CIRCULATING MONEY 101 

Cash, lagging in pools, does consume time in 
waiting so as not to take time in acting. Credit 
takes advantage of this 'Vaiting time'' of "lag- 
ging cash" to provide a secondary quantity of 
money which has time to circulate, and to balance 
the time taken to move goods from producer to 
consumer. 

The difference between cash, which has no 
time to circulate, and credit which is given time, 
keeps the two circulations distinct, allowing cash 
to measure what is being constantly consumed, 
while credit measures the time that must elapse 
until accumulated wealth is reproduced. 

With pools of cash waiting in banks, credit 
is created payable in this waiting cash, and it 
has then as much time to circulate as will elapse 
between the time it is issued and the time it is 
redeemed and cancelled. Banks can float a 
certain amount of credit payable in cash on de- 
mand, which amount is based upon the lagging 
cash they hold in reserve. 

The reason a government cannot increase the 
supply of cash so that it will provide a quantity 
of money to buy capital, comes from the fact 
that the power to coin credit is based upon the 
cash banks hold in reserve, from which they coin 
five dollars of credit for every dollar of cash the 
government coins, and a government cannot com- 
pete with banks in this channel of circulation. 



102 NATURAL ECONOMIC LAW 

The moment the government inflates the cash 
currency, banks will inflate credit five times 
greater, and keep the same relation between the 
quantity of cash and credit; hence disaster follows 
inflations of government money seeking to supply 
cash for all purposes. 

The circulation of money is as intricate as 
the circulation of living corpuscles in the blood, 
and like the blood there are two distinct systems, 
one flowing through the arteries and veins, giving 
a daily supply of living material to the body, 
and another in the lymph and cellular tissue, which 
corresponds to liquid credit. 

It should be quite clear that modern civilization 
cannot survive if it should lose its vital money 
circulation. All panics, periods of hard times, 
and the fall of empires result from some derange- 
ment in the vital supply of money, some inter- 
ference with credit that destroys the value of 
inherited wealth, and interferes with the great 
purpose of civilization. 

It has been proposed to do without money, to 
provide some system of labor checks by which 
present labor would get all the money and nothing 
would b^e paid for the accumulated labor of the 
past; every such attempt must wreck civilization. 

No man has ever been wise enough to explain 
how a steam locomotive, or a great turbine engine 
may be bartered for potatoes and corn, and no 
system of barter or arbitrary exchange can fit 
into our complex organism. 



CIRCULATING MONEY 103 

Circulating money! How easy to say! How 
common and vulgar appear the plain facts — 
Circulating money! It is as if one were to say, 
"I see many things in colors and forms, in clouds 
and sky, in flowers and trees," but yet was 
wholly unconscious of the great blessing of mortal 
sight to man, so are we unconscious of the bless- 
ings of money. 

I look upon a forest in autumn, on a mountain 
when the frost has painted its leaves, I look upon 
the sea and note the restless waves with the deep 
reflection of the heavens they carry, and I need 
not explain, even to myself, nor understand the 
divine ecstasy I feel. 

But, alas, for human poverty and misery! I 
cannot look upon the circulation of money, and 
know the power of that circulation for the hap- 
piness of man and not seek its meaning, its full 
purpose and seek to discover its laws. 

On my left hand are wide fields, where useful 
human labor performs tasks that ought to be 
joyful, and I take one dollar from millions to 
spend in a miraculous market that spreads out 
all about on my right. 

Taking one dollar in the morning I split it 
into smaller units, and with two pennies I buy 
a morning paper giving me a sight of the whole 
world, without thought or labor on my part. I 
pay five pennies for a street car ride of miles, 
while many thousands are working that I may 



104 NATURAL ECONOMIC LAW 

ride swiftly in ease and comfort, with no effort 
from me and unconscious of the labor in my 
behalf. 

Simple spending seems to be the beginning and 
ending of a vulgar use of money earned with 
hard labor, while in fact it is the most important 
link in a long chain of evolution, which ends with 
a market more wonderful than all the gardens 
of the world, where thousands of goods appear 
as if from seeds planted in the fields of Heaven. 

Dollars are indeed wonderful seeds that instantly 
bring forth into the market what the heart desires, 
seeds planted with great care, not by man but 
by that Master Workman who makes the lilies 
grow, 'Though they toil not neither do they 
spin." 

When a man spends money to buy goods, it 
is as if the things he buys came forth into his 
hand at the command of money, at that instant, 
created direct from the hand of God, without 
time or labor, coming from a great organism of 
which the individual is unconscious. 

The spender of money holds in his hand a 
creative power which is only to be compared with 
the creative power of God that calls life and 
objects into earthly existence by the mere exercise 
of creative intelligence; money is the intelligent 
creative power of God placed in human hands. 

There are many conflicting and silly theories 
about the "money power" and about the power 



CIKCULATING MONEY 105 

of God, theories that make up what man calls 
his highest philosophy about life, death and 
immortality. 

To get a distinct view of the modern world- 
wide philosophy we should behold, money in 
human hands as the highest developed cells of 
living creative power, and we should behold in 
man a being who is endowed with divine intel- 
ligence that he may become fit for an immortal 
life upon this earth, and who is so endowed by 
his being a spender of money. 

Money in human hands has a power of magic, 
as if upon a stage a magician was saying to a 
world-wide audience, as he holds to view discs of 
money, ''I drop this metal coin into a slot and 
a measure of wheat will appear without taking 
time or labor. I pass along and drop a coin 
into another slot and flour appears prepared for 
the baker, and from another place, bread will 
appear as money opens the magic door." 

Go with me into a Broadway, New York, 
restaurant for an evening meal, with its bright 
lights, music, dancing and song, with wine on 
the tables, and where joyous and well-dressed 
men and women are at play, at the tables will 
be found the three philosophies of modern life. 

The first and foremost philosophy is among the 
so-called learned, represented by the dissecting 
scientist who comes to his dinner with a bad 
digestion from a diseased liver, and with blood 



106 NATURAL ECONOMIC LAW 

poisoned from the lack of free flowing air to his 
lungs. 

The scientist will say to himself, as he looks 
over the tables, 'This room is nothing but a 
cell among a collection of similar cells, called a 
building on Broadway which is only a dirty chan- 
nel between collections of similar groups of cells 
called buildings/' "The city of New York, what 
is it? A diseased kidney of the body politic, 
and these people, Bah! they are microbes floating 
in the food supply, coming here to gather fat 
and waste time, little insignificant corpuscles." 

Philosophy number two, misnamed ' 'religion'' 
is represented by the reformer, who would compel 
every one to live according to a pattern, which 
his own narrow and egotistic self would impose. 
The reformer sees nothing in the gay and happy 
throng at the dinner but a place to propagate 
what he calls vice and sin. He is a reform 
parasite that finds deHght in living upon diseased 
tissue of the body social; he would abolish wine 
and song and destroy woman, except for the milk 
she may give to the child she alone may supply. 

This class of reformers are mental eunuchs to 
whom vice and sexual excitement brings mental 
joy. Being denied the dehghts of normal joyous 
association with the happy sex, they seek to 
aboHsh some form of conduct, and their own 
abnormal sex passion leads to world-wide perse- 
cution and murder, in the name of religion and 
reform. 



CIRCULATING MONEY 107 

Sitting on a park bench I have noticed, on 
bright pleasant days a fashionable limousine with 
its woman owner drive near the benches and 
stop, in all the pride of wealth and social position 
where the most persons could admire her. Tak- 
ing a paper bag in her hand she would scatter 
bread crumbs to the sparrows that flocked about 
on the drive, and then depart with the joy and 
satisfaction of good work done, returning the 
next pleasant day to the same task. 

To my mind this woman is a type of modern 
reformers, although in her case the disease is in 
its mildest form, vice reform, drink reform, 
socialism, anarchism, spitting reform, dog muz- 
zling and their kindred are all manifestations of 
the same erratic sexual disease of which the 
eunuch is the physical type. 

The reformer is infected from an impulse of 
the great nerve system of the social organism, 
which acts upon his weak nerves, weak mind 
and shallow soul. 

The nerve development of the body politic 
reaches a point in its growth where it can make 
the individual feel the pain which the masses of 
people are forced to suffer from human injustice. 

To ease this pain from the suffering of others, 
which greatly interferes with a reformer's egotistic 
contentment, with his selfish personal joy, he 
adopts one or another scheme of reform with 
the belief, pleasing to his selfish life that he is 



108 NATURAL ECONOMIC LAW 

helping to relieve the misery of others. By mak- 
ing a speech, asking an investigation, organizing 
hundreds of futile and silly associations, reformers 
seek to escape the pain, and the greater duty of 
understanding the true conditions of their fellows 
who suffer. 

Our reformers and reform societies rise up in 
their mental limousines, proud of the work they 
are doing when they scatter a few bread crumbs 
to the twittering sparrows, and, easing their own 
pain, they return to their selfish personal enjoy- 
ments, satisfied. 

At most of the tables are the people who live 
and practice the third philosophy of life, which 
is chiefly to be happy and joyful, to make others 
see the good of living in our good old world. 
They seek happy associates, love children and 
good living, seek bright faces, even when found 
with wine, woman and song. 

The real philosophers of joyful living sing 'The 
moving finger writes, and having writ moves 
on;" such people are human in joys and trials, 
but carry out the divine purpose, which is to be 
happy yourself and being so make others happy. 
At the dinner the philosophers of joyful living 
make the best of the present moment, not realizing 
perhaps that the present moment is always the 
immortal time. Immortality is found in present 
happiness; present time is the immortal time; 
that only is mortal which has become the past, 



CIRCULATING MONEY 109 

and the future is important because it brings us 
to the immortal present. 

The spenders of money, the enjoyers of Hving, 
are the real pioneers of religion and morals for 
they bring immortality into present existence, 
they gain an immortal life after death for them- 
selves, and help others to become fit for an im- 
mortahty that means a succession of happy lives 
on this earth. 

Spenders need have no fear of death, it holds 
no terrors to them, since it is the door to a renewal 
of youth for another period of happy living on 
earth; they have no fear of hell, of sin or the 
devil. 

The real immortal is he whom we call sinful. 
He is a man whom women and children love on 
account of and in spite of human sins that line 
the path of enjoyments. 'To sin is human" for 
it joins together the human being and the god 
in search of happiness, which is but a quest for 
the immortality of the soul. 



CHAPTER 7 
Counterfeit Circulation 

In the imagination of a story teller the secret 
of creating a human being was discovered by a 
scientist who was able to bring forth from his 
laboratory a man of intelligence and great phys- 
ical power, but he could not endow this creature 
with a soul. 

The story deals with the career of Frankenstein, 
a man without a soul, who dehghted in doing 
harm to those who trusted him. He found his 
happiness in the misery of others; it was his 
selfish pleasure to inflict pain upon those to whom 
he was most indebted for favors. 

When empires rise to power and greatness, 
after a people toil in slavery for centuries, when 
inherited wealth should bring comfort and happi- 
ness, the people in their dismay find the blessings 
they expected from wealth turn into evil. In- 
stead of spreading comfort and ease broadcast, 
wealth begins to impose burdens of over-work 
and poverty that did not exist before it was 
created. 

Somewhere in the laboratory where empires 
are born there comes into wealthy nations a 
Frankenstein, with superior intelligence and phys- 
ical power, who seems to take comfort and ease 
110 



COUNTERFEIT CIRCULATION 111 

away from the common people, deny them the 
happiness wealth brings and turn the gains they 
struggled to create into engines of misery and 
want. 

The greater the wealth, the more temptation 
for the Frankenstein monster to loot. The 
richest nations are the first to fall, to go back 
to barbarism from an increase of poverty in spite 
of great wealth on every side. 

A Frankenstein monster has always appeared 
in history to wreck every civilization of the world 
until our own times; working amid poverty and 
misery in cities where wealth is most abundant, 
and where its display by the rich, creates the 
utmost discontent among the poor. 

The church, the military power, and courts 
of law, had to have some control over wealth, 
and its income. To advance a people higher 
than savages, power was given to the state, to 
the church, to courts and to a class of rich prop- 
erty owners and this power, in some strange 
manner, became a monster of evil no one could 
master, and when the time came to curb the 
power of family wealth, the nation failed and its 
decHne and fall followed. 

With wealth concentrated to a few rich families, 
to estates of kings and lords, to rulers of the 
church and army, the people become helpless. 
It was as if an actual devil had taken the reins 
of power from the hands of man, and was ad^ 



112 NATURAL ECONOMIC LAW 

ministering the state for the injury it might inflict 
upon a helpless mass of laborers. 

Modern civilization, in spite of its science, 
machinery, railways, factories, telephones, steam 
and electricity, its system of education, its laws 
and courts, its congress and parliaments, its 
voting and debating, has not escaped its Franken- 
stein, on the very contrary its vastly greater 
total of wealth gives greater power to the owners 
while suffering and discontent becomes a rising 
tide to finally destroy the nation. 

The experience of history points with direct 
warning to one cause that wrecked all other 
empires, and to one condition that was responsible 
for their fall; the cause was the concentration of 
income property to a small and rich class of 
owners, with labor entirely cut off from such 
ownership, and this condition somehow brought 
about an ever increasing difficulty in finding work 
at living wages for millions of permanent poor. 

Flatter ourselves as we may, with modern 
institutions, with appUed science and mechanics, 
with steam and electricity, with church and state, 
governments and education, democracy or repub- 
lic, we are doing nothing to prevent the same 
catastrophe from the same cause, we face the 
same poverty among millions, that brought ruin 
to every nation in the past. 

The evils of unjust distribution are generally 
admitted by students of the subject, and many 



COUNTERFEIT CIRCULATION 113 

theories and schemes of reform are being proposed 
which do not touch the vital cause, and fail 
utterly to propose an adequate remedy. 

Ignorant, and blind leaders of the blind, 
poUticians and plotters, are seeking power. 
SociaHsm would destroy private property in 
order to cure what they call ^'capitalism" and to 
do so would give tyrannic power to an oKgarchy 
of hate which they call ''Labor" without showing 
the first faint glimmer of intelligence concerning 
the causes at work destroying civilization. 

There are many theories and schemes promising 
a future heaven on earth, from prohibition that 
is bone dry to Bolshevism as practiced by Lenine 
in Russia. All such schemes are artificial, none 
recognize natural or spiritual law, and all beHeve 
that organized society is something that legislators 
may order about, and change its fashion as a 
man may order a new coat from his tailor. 

The trouble between capital and labor may 
quickly and easily be remedied when the cause 
of that trouble is laid bare and when that cause 
is removed, and it cannot be remedied until the 
cause has been discovered and removed. No 
matter what promises may be made, we will 
fall and perish in common with cities now buried 
in sands of the desert unless we find the true 
solution. It is too late for half measures of reUef . 
The immense benefit of accumulated wealth can- 
not go to labor unless it goes from an increase 



114 NATURAL ECONOMIC LAW 

in wages above the sum labor must spend every 
day for a living. Unless wages will provide a 
surplus to buy a share of wealth, labor can have 
no share. 

The most popular remedy for admitted evils 
is to abolish private property by substituting 
government ownership, to make the most danger- 
ous experimenii on the living body of the social 
organism ever attempted in the history of the 
world, as Russia now abundantly demonstrates. 

Unable to explain how the glutted wealth may 
be widely diffused, or why it concentrates to a 
small class of owners, it is proposed to abolish 
entirely the one great civilizing power found in 
private ownership of property; it is proposed to 
put the body politic on the dissecting table where 
the most ignorant of quacks are to perform a 
major surgical operation certain to be fatal. 

To concentrate all income property to one 
corporation called the government, will forever 
close the door to the circulation of money. Prop- 
erty can never be sold and spent to bring about 
the higher level of wages which modern civili- 
zation demands, such procedure will only hasten 
the day when poverty and distress will bring 
its train of evils to a whole people to end in 
anarchy and universal ruin. 

The problem of a rich class arises from the 
apparent fact that, as far as any man may judge, 
the rich receive no special favors from laws of 



COUNTEKFEIT CIRCULATION 115 

the land. A rich man apparently buys his 
wealth in a market where every man has an equal 
opportunity to gain the same money, who failed 
to do so because he was inferior in education, 
brains, or money-making ability. 

A natural law always seeks to apportion wealth 
with substantial equality to all the people as 
it apportions other benefits of nature, but that 
truth never entered the mind of man nor appeared 
in the literature of the subject, hence: it was but 
natural to assume the rich to be a superior class 
with no law in their favor. 

A number of years ago, a clergyman was found 
guilty, along with others, in Chicago, for printing 
and passing counterfeit money, and when he was 
asked to explain, by a newspaper man, how a 
man of God and a teacher of morals and religion 
could engage in an enterprise of that kind, he 
made the following answer : 

''I did not believe it was wrong or sinful to 
put a counterfeit in circulation, if it could not 
be detected, for if it passed the same as good 
money I would then have been doing a benefit 
by giving my country a greater supply of money, 
and although I gained wealth for myself the 
people would have more money for business and 
labor would be better employed. 

''What harm would I have been doing by in- 
creasing the supply of money? The country 
needs more money, needs more rich men. I 



116 NATURAL ECONOMIC LAW 

could have built houses and factories, given money 
to the churches that need it badly, and helped 
the colleges and libraries." 

The fact that counterfeit money gave the 
clergyman wealth without earning it was of no 
consequence in a country where men may become 
millionaires overnight; and the further fact that 
labor must somehow earn the wealth that someone 
gives away in benevolences and charity seems 
quite absurd to the man who judges facts by 
appearances. 

The argument for maintaining a rich class in 
every country has always been the same kind; 
the rich spend money to give labor work, they 
buy and build capital, for otherwise labor would 
not be employed; they carry on works of benevo- 
lence and charity that the government refuses, 
or is unable, to do, and no one is expected to 
lose by the wealth the rich accumulate. 

The adulation of the rich man, in press, on 
the stage, in pulpit and in fiction, is but a return 
of the old flattery of kings and their royal favorites. 
It was not wise to oppose the king with his power 
to punish and reward, and it is not wise to oppose 
the rich man who has a similar power today. 

The modern millionaire has more power, more 
gifts to bestow to his favorites in public and 
private life and to members of congress, than 
the government; he may give away presidents of 
great railway systems, create directors of banks 



COUNTEEFEIT CIRCULATION 117 

and officers of factories; he has more Hvings to 
bestow on the church than any king in history, 
and more power over labor than the builder of 
the pyramids, who sacrificed thousands of slaves 
that his bones might sleep under an imposing 
tomb. 

If there are honest rules in the game of getting 
rich, we need to know such rules, so that we may 
all play the game with equal opportunity under 
the rules, and see that no one works to our un- 
doing, and to our loss. If each man has an equal 
chance tell us how it comes about that only a 
few are millionaires. 

There is a rule of crime — stealing, taking with- 
out giving value received — a rule the most simple- 
minded understand. There is a way to gain 
wealth by issuing and passing counterfeit money, 
with little or no cost to the spender, money labor 
must earn to give it value, money which labor 
must redeem. 

When one of the players in a game supplies 
marked cards which he alone may deal; or when 
another plays with loaded dice, the natural rules 
of chance are no longer in force by which each 
player has a chance to win, for the simple fools 
are fated to lose before the play begins; and so 
has it been with labor and the accumulation of 
wealth. 

The milhonaire class is as much a superior 
class as counterfeiters and gamblers who play 



118 NATUKAL ECONOMIC LAW 

with marked cards or loaded dice, who may be 
deft at that game, but should be credited with 
little else than a gift of gambling. 

While a country is newly developing its land 
is given away without cost, and billions are 
bestowed by a rise in value of land; then the 
newly created capital must be distributed as a 
gift to its first owners, but the benefits are ex- 
pected to go to labor at a later time. 

After the natural resources of a country have 
been improved with railways, cities, towns, farms, 
factories and mines that same capital must be 
rebuilt once in fifteen years, without adding to 
the total wealth, and without increasing the 
quantity or variety of goods, it then becomes a 
vital matter whether or not labor shall again 
repeat the first gift of wealth to its owners, 
without gaining any benefit for itself. 

Capital is built the first time, without a supply 
of money for that special purpose, and therefore 
is charged to labor as a loss, by compelling labor 
to pay two times the cost of its living, but after 
capital accumulates as past-labor, and must be 
rebuilt, then it has its own money and this capital 
money is intended to bring about diffusion of 
wealth among the millions. 

Capital, in rebuilding, has its own supply of 
money, but when capital money fails to circulate 
banks are compelled to put counterfeit into cir- 
culation for unless labor is partly employed with 



COUNTERFEIT CIRCULATION 119 

counterfeit tens of thousands will be always out 
of work, under our present land and debt laws. 

Each billion dollars of government cash, will 
turn over six times a year and pay six billion 
dollars as cost of national living, creating three 
billion dollars profit to capital, upon which debts 
are based. Each six cents of interest is expected 
to circulate one dollar of cash during one year, 
and pay that dollar in wages over and over again, 
but when interest creates a debt which promises 
to return money in the future borrowed money 
becomes a counterfeit which consumes the interest. 

With three billion dollars profit each year 
paying about six, per interest each one billion 
dollars should support fifteen times its own value 
of capital but debts may be created of eight billion 
dollars for each one billion dollars of interest, and 
the debt money becomes counterfeit preventing 
a wide distribution of wealth by substituting a 
dormant dollar of debt for a live dollar of good 
credit money. 

The dollar debt puts into circulation is only 
spent once but continues to draw interest year 
after year; hence, debt money buys once for the 
rich and fails to return to buy wealth for the 
laboring class. 

If I were to say to any property owner ''There 
is a cloud upon the title to your property because 
it was purchased with counterfeit money he 



120 NATURAL ECONOMIC LAW 

would answer, 'The money buying my property 
was identical with other money, with money that 
buys goods, and you should be put into an insane 
asylum, or be in jail for teaching a doctrine of 
that kMd, undermining the sacred right to 
property." 

Because a man buys property with money in 
general circulation does not settle, by any means, 
the question of whether or not it may be a counter- 
feit which has not been detected like other coun- 
terfeit money getting into circulation. 

If cash could be counterfeited with success, 
the false coiner might soon become a milUonaire, 
getting good money for the counterfeit and turn 
it quickly into property, and build factories, rail- 
ways, office and apartment buildings. 

Cash must be fixed and limited in quantity, 
the same dollars must be used over and over 
again, and counterfeit cash would quickly in- 
crease the quantity, so that sooner or later it 
must be discovered and the guilty coiner punished, 
if it was not detected it would saddle its cost 
upon the public by increasing prices, a loss labor 
would be compelled to shoulder. 

Credit money, on the other hand, is not fixed 
in quantity, the government has no power to 
coin or circulate it, each day it comes newly 
into use and each night it is cancelled, and when 
counterfeit credit appears it cannot be separated 
from the genuine. 



COUNTERFEIT CIRCULATION 121 

When debt promises to pay cash in the future, 
the fact that the promise is a He, will not be 
discovered until the debts mature. By evading 
payment on demand and by consuming interest 
while holding money out of use, debt money 
becomes a counterfeit to all intents and purposes, 
when it buys property and is cancelled it cannot 
be detected. 

Capital must be built upon fertile locations 
where it will collect cash to pay interest from the 
buyers of goods, and we use interest money to 
finance a quantity of credit that will buy capital 
in its own market. 

It is the location that enables capital to collect 
profit, not merely because goods sell to consumers 
for more than cost, but because the sales are made 
in great quantity by massing consumers in cities, 
and because the expense of each sale is low, and 
the saving creates the profit capital collects. 

Capital is first built as an experiment, it must 
demonstrate the fact it has a proper location 
and may collect two times the average rate of 
interest on its cost, whether it be a farm, a factory, 
theater, hotel, office building, railway, or public 
utility. 

If capital makes a mistake in selecting its 
location, or if it is poorly constructed on a good 
location, it becomes a loss, not only to the owner 
and builder, but a loss to society at large a loss 
charged up in the cost of living. 



122 NATUKAL ECONOMIC LAW 

The power to charge unsuccessful capital as a 
loss to labor is the thin edge of the wedge whereby 
counterfeit money gets power to circulate, for 
if a natural law charges the failures of capital 
to labor in a higher cost of living, then the human 
law may be so framed that successful capital 
becomes a loss to labor carried in the higher 
cost of living. 

Ten thousand dollars is advanced for an experi- 
ment in building upon a location that seems 
fertile, it must collect, from the sale of a living 
its cost of ten thousand dollars with interest, 
for unless it does collect two times the rate of 
interest each year it will not be a success. 

Assuming it has been properly located and 
built, it will collect, above cost of maintenance 
and repairs, one thousand dollars each year to 
return the money consumed in building, or ten 
per cent, and another thousand dollars interest 
at ten per cent, in ten years, twenty thousand 
dollars, or two times cost will have been collected. 

If the builder borrows ten thousand dollars 
cost money, he may become the owner of the 
building without debt at the end of ten years, 
and his creditor, being paid twenty thousand 
dollars, could buy the same building as an invest- 
ment paying ten per cent. 

The builder, however, is in the business of 
producing and selling buildings as a manufactur- 
ing proposition, he is not expected to wait ten 



COUNTERFEIT CIRCULATION 123 

years on one building paying its cost, to get 
money for another, and if a successful building 
will return two times its cost in ten years, the 
annual interest from ten buildings will create 
the same money once every year. 

Labor cannot wait ten years, or one year to 
be paid for buildings it may create, and if it is 
paid, such payment must come from the sale 
of buildings in a market supplied with money 
to buy them, the same as the commodity market 
finds money to buy goods. 

If payment for capital may be postponed ten 
years then it becomes impossible to pay labor 
for it each year, and some scheme must be put 
into practice by which money can wait ten years. 
Debts provide the avenue which evades payment 
to labor for the capital it supplies year after 
year. 

When the builder must pay ten thousand dol- 
lars in advance for a location, half the income will 
be taken in advance to return the cost of land, 
and thereby debts destroy the rotation of credit 
by which labor may be paid for the capital it 
produces. 

If capital must collect two times the rate of 
interest on its cost then banks will anticipate the 
return of cost money. Profit from selling capi- 
tal at two times cost will keep the banks sup- 
plied with credit money that will turn over once 
a year. 



124 NATUEAL ECONOMIC LAW 

A natural law supplies money without waiting 
ten or more years to collect that money from 
consumers, a supply which is created by a market 
price of two times cost, but if land is permitted 
to take one time cost, then capital must sell at 
its cost. 

There are many grades of fertility, seeking 
capital to develop them; from farm lands that 
will support one hundred dollars per acre of 
capital, to the best locations in a great city, 
where an acre will support a building costing 
ten milhon dollars, to sell for twenty millions. 

A small rate of interest creates a low cost for 
capital on fertile sites and should make men 
desperately anxious to build almost anywhere in 
the civilized world, if the market will buy 
capital at the standard price of two times cost. 
In a natural capital market the extraordinary 
demand upon labor for buildings and material 
would exhaust the labor market, and force the 
rate of wages from a minimum standard, which 
buys a living, to a maximum standard which 
will allow labor to buy its share of wealth. 

Selling capital at two times cost will keep in 
continuous circulation, a great volume of genuine 
credit money based on higher wages. Labor need 
not wait, nor the builder wait on money in a 
market where capital sells at its standard price. 

Land owners control fertile locations while 
bankers control credit money. If a lot will sup- 



COUNTERrEIT CIRCULATION 125 

port a ten million dollar building, and collect 
rent on two times that cost, the building should 
sell for twenty million, or ten milUon dollars 
profit; giving money to increase wages now 
taken to increase land values. 

Fertility gives the owner of exceptional loca- 
tions the opportunity to demand almost any 
price when it carries a margin of ten million 
dollars; and land can advance in cost at a few 
locations until all the margin by which wages 
may advance has been absorbed by a rise in 
value of land. 

The land owner, without effort on his part, 
forces the builder to come to him to buy the 
place where profit may be secured thereby creat- 
ing the direful competition that keeps the market 
glutted with unsold goods; keeps labor unem- 
ployed, and keeps wages at actual cost of living. 

The natural law will not permit money to 
circulate when paid as cost for land. Money 
must turn over, must be paid to labor in 
wages and must be spent; money buying land 
cannot be spent for labor producing land; a debt 
must carry a cost of land which has no cost in 
labor. 

The natural law will not supply money to 
pay a cost for land, the builder is therefore 
forced to borrow the cost of his land; the owner 
taking a mortgage, or sells a mortgage to bankers 
and investors. Because a mortgage can never be 



126 NATURAL ECONOMIC LAW 

actually paid, it is given a preferred lien upon 
the total value of land and building combined. 

The law gives the owner of the mortgage a 
preferred lien upon the money a property may 
sell for, because the lender has postponed his 
claim upon money, and waits the impossible 
return of that money. Here is where the human 
law interferes with a natural law which will not 
postpone payment, but would anticipate it. 

The banker learns from experience that post- 
poning the payment of large sums will not 
produce the money, but will increase the demand 
for money the debt promises to pay and, as a 
result, when property is forced to sell in such a 
market, it rarely brings more than its debt, and 
the owner of the debt must take the property 
because there is no other buyer for it. 

The accumulating demands upon money by 
debts to be paid in periods of from five to 
twenty years, soon begin to segregate the de- 
mands upon money into two great cycles when 
debts fall due; namely, in periods- of ten and 
twenty years, giving tight money and hard time 
periods every ten and twenty years, at which 
time debts must be liquidated in large number, 
so that business may continue with the credit 
money thus set free. 



CHAPTER 8 
Gold 

In many ways gold has been one of the most 
interesting subjects in the world, not only because 
it is used for money, but before it was so used 
there was a fascination about it, among savages 
as well as civilized men. 

Poetry, fiction, love and war are interwoven 
with threads of gold. It is sometime master over 
the soul of a man, and sometimes it holds the 
destiny of a nation in its gilded embrace. Whether 
or not, gold so interesting in other fields, may 
hold that interest, when we seek to trace its 
power and mystery in fields of finance, is doubt- 
ful, but the importance of finding the power of 
gold in the growth of civilization will be admitted. 

Gold is an intricate subject for investigation 
on account of a connection between cash and 
credit, labor and goods, which gold was able 
to establish. Gold is a sort of spiritualistic 
medium through which a certain past life of a 
people, represented by capital, is made to live 
again through the circulation of money, to be- 
come an hereditary gain from ancestors acting 
in a body politic. 

How to illustrate the mediumistic power of 
gold is a hard problem, for we cannot appeal to 
127 



128 NATUKAL ECONOMIC LAW 

that fascination by which it takes the center of 
the stage in art, commerce and Hterature, but 
must be content with handhng common facts. 

The gold bug must be handled scientifically, 
but it is something more than a metal; it is much 
Hke a gold bug, it is a metal and a medium with 
spiritualistic powers; there is something super- 
natural about it, a medium between the work 
of the living and the spirit of workers, no longer 
living. 

A parallel could be established for a short 
distance between gold as a metal, and the carbon 
which is a basis for all growth of vegetable and 
animal life, for without carbon we could not 
imagine how life could acquire a material body. 

Yet gold is different in the body pohtic. If 
we somehow could connect carbon with cells of 
protoplasm that builds up the human body we 
could then have an illustration of units of money 
or gold, building the capital of society by repeat- 
ing the birth of an ancestral past and improving 
upon that past. 

The importance of gold to mankind is based 
upon the time labor must consume in supplying 
a people where money buys the living. If a 
savage people could live without cultivating the 
soil as birds and fishes live, gold would be the 
same as another yellow pebble. 

When different kinds of goods are very plenti- 
ful and cheap at places far apart, and other goods 



GOLD 129 

are scarce and high in price at such places, goods 
will move from where they glut a market to where 
they are in active demand. 

Oranges, for example, will rot with a great 
crop at the orchards while apples will do the 
same at another part of the world, but when 
exchanges may be made, each surplus will take 
on a high price that will prevent what otherwise 
would be a waste of the bounty of nature. 

To make exchanges, to take loads of apples 
from one part of a country to where oranges may 
be had, and return with oranges, consumes time 
and labor, and a bridge of some kind must span 
the time taken by goods in seeking the best 
market. 

Something had to come into play that could 
represent a missing half of each trade where 
goods were separated by time and distance, 
something that would not consume labor, and 
gold was early on the job, able to fulfill that 
condition. 

After a people learn that trading a surplus 
they cannot use for another surplus they do not 
have is very profitable, such knowledge becomes 
of great advantage to them; they begin urgently 
to seek all sources of trade, fields of production 
widen all over the world hunting for new varieties 
to trade, and for new quantities of cheap goods to 
be sold at profitable prices. 



130 NATURAL ECONOMIC LAW 

Shipping developed as a carrier of goods over 
the easiest roads, over rivers and oceans. When 
a ship leaves a home port with surplus goods to 
trade for other surplus, time, labor and a ship is 
being consumed by the voyage. 

During the time of travel goods are waiting 
to be exchanged and both goods and the ship 
may be lost at sea, at which time gold is able to 
make good such loss by its being held at some 
safe place where it may build another ship. 

The mystery and power of gold is found in its 
ability to represent any kind of goods in travel, 
to act for a missing half in every trade, and to 
represent a ship or any other capital. The 
real importance of gold has never been cor- 
rectly explained, although thousands of volumes 
have been written about gold and its connection 
with trade. 

The failure to explain gold, in its capacity to 
insure all kinds of value, arises from a false theory 
of trade, devoid of common sense, having no 
facts to sustain it, a theory employing such 
phrases as "free trade' ^ and ''free competition," 
as if trade could be other than free trade, or as if 
competition could possibly be free. 

Making an illustration of trade to include all 
the facts is far from being simple. To give an 
illustration as simple as may be: suppose a ship 
takes on a cargo of apples to sail to another port 
and return with a cargo of oranges — suppose 



GOLD 131 

one apple will exchange for ten oranges where 
they are in great abundance, and one orange will 
trade for ten apples in a like fertile territory. 

The very important fact to get firmly in the 
mind in regard to this exchange is that apples sell 
for ten times cost, measured in oranges, and 
oranges sell for ten times cost measured by 
apples, for the cost of an apple is another apple 
exactly like it, and the same is true of an orange. 

The shipper would take apples and sell them 
so that he could return with ten times as many 
oranges, and if he could sell the oranges he would 
have his profit, but not in any commodity as 
present theory asserts when it says trade is a 
mere exchange of goods for goods. According 
to theory profit will not arise with the perfect 
exchange of commodity for commodity under 
free trade and with free competition. 

The shipper takes all the apples his ship will 
carry, and buys all the oranges he can carry, 
for the return voyage, and thereby secures a 
profit from the sale of apples and will get another 
like profit when the oranges are sold. 

He does not take his profit in apples or oranges, 
nor do any of the men who work upon the ship, 
but you may say the money they get will buy 
other goods, buyers of apples and oranges make 
and sell other goods, and hence at last the whole 
exchange is goods for goods with all profit can- 
celled as the classical theory of free trade holds. 



132 NATUEAL ECONOMIC LAW 

But when other goods are produced and sold 
the same rule is found; they are produced in 
great abundance to be sold where they are scarce, 
so that every sale makes a profit, and such profits 
accumulate, they do not cancel each other, and 
the more trades the illustration embraces, the 
more absurd the prevailing theory becomes. 

It ought to be as plain as a pike staff that the 
men who sail ships, and the men who build ships, 
do not impose their labor upon those who work 
the fertile lands, they are not a burden, but earn 
their own living like the labor whose goods they 
consume. 

The profit obtained by seUing oranges and 
apples above cost does not in any way affect the 
exchange if all prices are equally advanced to 
create such profit. Profit must pay for ships 
and goods lost at sea, and how would that be 
possible if trade was nothing but an exchange of 
goods for goods, and did not include an exchange 
of capital for goods? 

The men who work on a ship and the men who 
build ships, must be paid out of the earnings of a 
ship, which means out of the value of a ship, and 
they cannot be paid out of the value of goods, 
but can be paid out of the profit that arises from 
selling goods at prices above cost when such 
higher prices are paid, in the end by capital and 
not by goods. 



GOLD 133 

Profit money is created as an addition to the 
quantity that buys goods, for unless this was the 
case, capital would have no money with which to 
build, or sell. Profits must finally be paid by an 
exchange of capital for goods and by a distribu- 
tion of wealth to new owners from money pro- 
vided solely for building and buying capital. 

The trade of goods for goods does not cancel 
profit and leave no remainder in a perfect system, 
as theory asserts. Trade over the world in goods 
does not balance or leave a slight remainder that 
must be settled by sending the difference in gold. 
Such a theory is contrary to all the facts and to 
common sense, although it is almost universally 
believed by writers on the subject. 

Every trade leaves a profit on each side for 
each commodity when it follows normal fines. 
Taking goods from where they are cheap and 
plentiful to where they are to sell at a high 
price, creates the profit that must be exchanged 
for capital. 

The accumulation of profits from every trade 
creates a quantity of profit or capital money, and 
gold obtains its great powers by being able to 
create this profit which will exchange past labor 
for present labor. 

Living day by day consumes all the goods we 
produce and a part of all our capital, but goods 
are entirely consumed, while the value of them is 
renewed entirely from new goods. Capital on 



134 NATURAL ECONOMIC LAW 

the other hand has a permanent value not so con- 
sumed, the part consumed is replaced each day 
so that its value will remain fixed and permanent. 

Where does a ship get a value in present money 
which may last a hundred years in the future? 
Or a building get its value? A railway, building 
or a ship must contribute something to the stand- 
ard of living for the present generation, from 
travel, shelter, amusement, education or leisure. 
Capital collects just what it contributes to the 
better living of a people, and the cash interest 
it collects will create its own credit money that 
should buy and distribute wealth among the 
people like cash buys and distributes goods. 

The value of a ship, or other capital, must be 
given to it by money set aside for that purpose, 
and such value cannot be given by the same 
money that puts value into goods. Goods sell 
above cost so as to carry the germ, or profit dollar 
that will then create the money upon which the 
value of capital depends. 

This brings the explanation back to the place 
where gold is held to insure the loss from a ship 
going down at sea, or the loss of a cargo. If each 
cargo and ship had to have a quantity of gold set 
aside to balance its value so as to insure it against 
loss, then gold would have no power to represent 
the value of ships at sea or what they contain. 

When a ship is successful, not only is no gold 
taken, but the owner of the ship will pay for the 



GOLD 135 

use of the gold the same as if that gold was itself 
a commodity, entitled to its profit from a price 
above cost, and on that account the same gold 
may be used over and over again, like the ship 
itself. 

Experience will prove to the gold owner that 
he may multiply his profit by having the same 
quantity of gold insure as many ships and con- 
tents, as may safely be done; for with the same 
gold giving security to twenty times its own 
value it may collect a profit equal to five or more 
times the annual rate each year, and it thereby 
creates four or five times as many dollars of 
credit as there are dollars of gold. 

When gold is able to insure twenty times its 
own value it thereby creates another quantity of 
gold that has no material existence, creates a 
spirit power of gold sailing with the cargo or ship 
at sea, and this fact permits credit money to 
multiply cash so that there may be five times the 
quantity of credit there is of cash. 

Credit money buys and sells past labor, which 
has no material existence, it does not therefore 
demand a money having a material body, but 
as soon as a ship is lost at sea, or goods are lost, 
then spirit credit money must create material 
money to equal present labor with which to re- 
place both ship and goods. 

The value of gold does in some measure depend 
upon its material quaHty just as carbon has its 



136 NATUEAL ECONOMIC LAW 

peculiar quality, separating it from all other chem- 
ical elements, but gold does not depend upon its 
color or glitter. 

Surplus goods sell at prices above cost, and 
while gold can never be in surplus when used as 
money, it must sell above cost, which its produc- 
tion at mines enables it to do, and it is therefore 
like all other commodities. 

Gold when exchanging like other goods will 
sell for a like profit as a commodity, but while 
other goods are consumed and the value of them 
is restored by new goods, gold is not consimied 
but its value is permanent like that of capital. 
It gets this permanent value because it can rep- 
resent a commodity in trade and collect interest 
money by becoming the missing half of com- 
modities in every trade where time and distance 
intervene. 

Gold gets its power over money, and its basis 
of credit because of its dual nature to become 
either capital or goods at any time. 

When gold insures a ship at sea it offers a value 
of gold as a commodity equal to the value of a 
ship, and these values are made equal by the fact 
that a gold dollar can collect the same interest 
from the cost of living as can a dollar invested in 
a ship. 

The ship is past labor, and when it sells it must 
sell for money that will buy the services of present 
labor, money to buy goods or leisure. How is it 



GOLD 137 

possible to have in circulation a quantity of money 
to buy past labor equal in value to present labor, 
when the accumulation of past labor in ships, 
railway systems, factories, mines, farms and 
cities will call upon present labor for ten years 
work to balance the accumulation from the past? 

The vast surplus of past labor is prevented 
from coming upon the market in quantities 
greater than present labor can itself pay with 
credit money from the fact that past labor is 
represented by spirit money, which will not buy 
present living unless it is converted into cash, 
and thereby cancelled. The quantity of cash 
being strictly Umited, it follows that the cash 
set aside to cancel credit is also limited, and will 
thus limit the amount of money that may buy 
accumulated wealth each year. 

Past labor has no cost of living to pay and its 
money circulates in spirit form as a bank check, 
or form of speech, and it exchanges for material 
cash, but it must be cancelled when used to buy 
a living, altho it may circulate as an independent 
currency, in many lines of trade to a better 
advantage than cash, and may be used in much 
greater quantity. 

The value of property is crystallized past labor, 
which must be kept equal to the value of present 
labor, as wages rise or fall, without changing the 
price of capital. This equahty is maintained 
every minute of the trading day, by the con- 



138 NATURAL ECONOMIC LAW 

stant exchange of credit money for cash, dollar 
for dollar. 

To get a quantity of credit money that is not 
cancelled to remain equal with a quantity of 
cash, so that it may have the same value in buy- 
ing capital, each unit of credit money is given its 
value by pennies of cash interest for one year, 
which sum of interest is collected from the cost 
of living. 

The ability of gold to insure ten or more times 
its value has the effect of creating that much 
spirit gold, for ten or more times the quantity of 
reserve gold is promised to be paid. The same 
gold represents ten or twenty times itself in trade, 
and this is surplus spirit gold, that becomes credit 
money. 

The power of gold is not found in its peculiar 
qualities as a metal, although it is universally 
desirable on that account. Savage people will 
gladly exchange any surplus they may have for 
its value in gold, but the higher the civilization 
the less influence has the glitter and color of gold. 

Gold holds a peculiar quality in being the only 
substance in commerce that is both a com- 
modity and capital at the same time by which 
it becomes a money metal; it can become a 
commodity any place in the world to exchange 
for any kind of goods, and it can become capital 
in any market of the world to collect interest by 
insuring ten or more times its own value in goods 
or capital. 



CHAPTER 9 
Banking 

The oldest business in the world, and the most 
successful is the banking business; it is also the 
most essential, and needs therefore to have a foun- 
dation that will not give away, supporting, as it 
does, all other lines of endeavor. 

With banking in trouble every enterprise 
comes to the brink of disaster, and when banks 
are ''shaky," the whole business structure wob- 
bles. For this reason the natural law must be 
as closely followed by the banks as the human 
law will permit, and the success of banking de- 
pends upon following the rules laid down by a 
power infinitely above the human law. 

Banks are so carefully guarded by natural rules 
that when human law establishes mortgages, post- 
poning money to a future time, banking is pro- 
vided with a counterfeit currency that will sup- 
ply money as long as new debts can be created to 
consume interest. 

The path banking takes to the road of success 
is not hard to find or describe, for it is the simple 
one of not permitting it to postpone the payment 
of its debts into a distant and uncertain future 
by mortgage, but to maintain deposits payable 

139 



140 NATURAL ECONOMIC LAW 

on demand and keep them at par and on a cash 
basis all the time. 

No matter how great or small the capital of a 
bank, within reasonable limits, be it ten thousand 
dollars or ten million, it will be equally successful 
under the rule. Competition, hard times, and 
falHng prices, will not directly interfere with suc- 
cess, as it will with other lines of business. 

Does not this fact of banking success point a 
moral and contain a lesson from which other hues 
may profit? If a study of the basic rule of suc- 
cess for banks is a rule other lines fail to follow, 
how great would be the gain by adopting the 
banking rule in every business? 

Follow the rule of a cash business, and notice 
if you can call to mind any failures, from com- 
petition, hard times or low prices, where there is 
no mortgage, and where every demand upon the 
business to pay its obligations is met with cash. 

A cash basis, under the rule for banking, does 
not demand a supply of money from the busi- 
ness; on the contrary, it may be equally suc- 
cessful if not a dollar of its own money is en- 
gaged. Actual success depends upon how much 
greater may be the amount of other money, than 
its own capital a bank is able to use. 

The money owned by any bank will scarcely 
earn enough to pay room rent at the location 
it requires; a bank must borrow from five to 
twenty times its own capital; the greater its 



BANKING 141 

power to use other money than its own the more 
efficient, under the rule, and the more successful 
it becomes. 

A bank starting in business, for example, with 
but ten thousand dollars of its own money would 
have a gross earning of less than a thousand dol- 
lars a year, and in the same proportion a bank 
starting with ten milhon would find its expenses 
above receipts from its capital, and will need 
ten times as many dollars of deposits as it has 
money of its own. 

The rule of success is the same for all banks, 
whether the money of the banker is ten thousand 
dollars or ten million: he can make profits only 
as he can use borrowed money to the tune of ten 
or more times his capital, and doing so, each bank 
is on the same profitable basis. 

This seems, however, to be contrary to another 
rule of natural law that debts are the greatest 
crime a n^^tion may commit, for borrowed money 
is debt of some kind. The debt that becomes a 
fatal disease in the body politic is one that post- 
pones into an uncertain future the payment of 
money. When a bank borrows money from de- 
positors it does not put off the payment of that 
money into the future, but on the very contrary its 
business enables it to pay on demand ten times as 
much money as the cash it holds for this purpose. 

A bank, instead of postponing payment to the 
future, actually creates new moriey, and after 



142 NATURAL ECONOMIC LAW 

having created this money it proceeds to loan 
it on bonds, mortgages and other long time future 
payments which destroys its regular turnover 
each year. 

Banks secure deposits of ten times the cash it 
need keep on hand, and is able to pay cash to 
any depositor who needs the money. If a debt 
postpones payment that should be payable on 
demand, then capital money fails to return to 
circulation until the debt is paid, when it should 
turn over once every year, and would do so if all 
loans were payable on demand. 

Banks are not permitted to postpone the pay- 
ment of deposits; trying to do so ends the career 
of that bank, and therefore statute law, knowing 
disaster from experience, allow banks no choice 
in the matter. Payment on demand must be 
made, or the bank must go out of business. 

The human law that keeps a bank on a cash 
basis requires it to keep on hand a certain sum in 
actual cash at all times, which is a fixed propor- 
tion of its total deposits, payable in cash. 

The natural law fixes the sum of cash that will 
keep credit equal to cash at about ten to one; 
that is to say, one dollar of cash cancelling checks 
all the time, will permit the bank to meet the 
demands of ten times that amount of deposit 
credit. 

The amount of reserve cash for each particular 
bank depends upon the nature of its business, and 



BANKING 143 

bank laws recognize this fact. Savings banks 
have a reserve in cash as low as one dollar in the 
hundred, while reserve banks that supply other 
banks with cash in critical times need about one 
quarter of its liquid capital, one dollar to four 
of deposits. 

A bank cannot count as capital its marble 
building at the center of business, its costly bur- 
glar proof vaults, or its expensive and ornate 
furnishings. These are not the things that make 
a bank able to pay on demand, are not banking 
capital, in fact, for only the cash on hand in 
actual money will permit a bank to remain safely 
on a cash basis. 

To get a clear distinction between the rule 
that makes a cash business a success and failures 
in other lines of business, it may be well to com- 
pare banking methods with corporation financ- 
ing, using for that purpose, one of the greatest 
corporations in the world, and a very successful 
one, The United States Steel Company. 

The United States Steel Company has in round 
numbers a capital of fifteen hundred million dol- 
lars upon which it earns interest and dividends, 
which capital is equal to deposits of that sum, 
due to investors, money of the public the corpo- 
ration uses in its business, like deposits of a bank. 

The deposits of capital, however, may divide 
into three or more layers, according to an amount 
of fat that was found necessary to protect each 



144 NATURAL ECONOMIC LAW 

layer so as to secure actual money from the public 
in financing and promoting the enterprise. 

Three classes of owners have three different 
legal kinds of capital invested, whereas the law 
will not permit a bank to make such inviduous 
distinctions among its depositors; three different 
claims upon the money value of capital are strati- 
fied by three kinds of securities, one being pre- 
ferred above another. 

In a total of fifteen hundred millions United 
States Steel capital, the first layer is protected 
by two outer layers of fat, and it consists of six 
hundred and twenty miUions dollars in bonds, a 
preferred royal class, having a divine right to 
steel money in advance of money paid in by 
other owners. 

After the royal owners come the barons, 
another layer close to the king, but of less di- 
vinity, who may claim their money, after royalty 
has been paid, viz. , preferred stock, three hundred 
and sixty million dollars, and next in order comes 
the bourgeois, the common herd, of owners who 
hold common stock calling for slightly more than 
five hundred million dollars, and who get what 
may remain after liquidation. 

Without criticizing the stratified securities of 
this concern, which is contrary to the rule of 
banking, a rule all corporations must obey or 
finally fail, let the reader picture what would 
happen to banking if it was permitted to stratify 



BANKING 145 

its deposits in three layers each having a dif- 
ferent claim upon the money of a bank. 

In such case banks would be relieved of paying 
deposits and need only pay the interest, and 
three classes would have different rights to such 
interest; the lowest class would be constantly 
losing its money, to be followed by losses from 
the next lower, the owners of the first liens getting 
it all in the wind up. 

Depositors instead of having accounts of a 
fixed value at any place payable on demand 
would have deposits of fluctuating values for 
every bank, each day, as new quotations were 
made, leading to speculation in bank accounts 
similar to speculation on a stock exchange when 
depositors sought a market, wherein to exchange 
deposits for cash. 

In such a system the depositor requiring his 
money would be compelled to find a buyer among 
his acquaintances or the public, and as millions of 
them need a market, a Depositors' Certificate 
Exchange would arise like the New York Stock 
Exchange, where buyers and sellers would come 
to speculate on deposit accounts of banks. 

If a Depositors' Exchange actually sold de- 
posits, for the sum they called for there would 
be no gain except a small brokers commission, 
and it would be of no advantage to the banks, for 
it would take as much money to pay them as if 
the banks were paying on demand. 



146 NATURA.L ECONOMIC LAW 

It would quickly become apparent however 
that ten per cent or less of the entire sum on de- 
posit would call for actual money each year, 
leaving ninety per cent that might be manipu- 
lated, allowing sales to be made on what is called 
margin, and by putting up ten per cent in cash 
a buyer might call a deposit his own to speculate 
with, as is done with stock certificates. 

The fact that ninety per cent of all deposit 
accounts are waiting their turn to be paid, and 
the whole sum is called once in ten or twenty 
years, violent financial panics would gather in 
ten and twenty year periods from such specu- 
lation. 

This parallel between what is called an open 
market for capital and a cash market, will demon- 
strate that banking would be impossible if its 
funds were at the hazard of a competing market. 

Banking is the best and safest business in the 
world, the most respected because it follows a 
natural law, and has a closed market where no 
speculation is possible, and where every claim for 
money is equal and is paid on demand. May not 
all other lines of business follow the same rule? 

HOW BANKS ARE PLANTED AND GROW 

Banking is difficult to describe, although it 
keeps simple accounts of a cash business between 
its depositors and borrowers. It is difficult to 



BANKING 147 

describe because it maintains a great co-operative 
balance between hundreds of millions of accounts 
all over the world, and a ten-fold greater account 
of past labor which capital brings into present 
markets. 

When a settler in a new country, for example, 
builds his log house, the acbount between his 
labor, and the house he occupies is very simple, 
the forest supplies the lumber, the fertile land 
grows the surplus living, giving him spare time 
to build and improve his land. In later times, 
when life has become much more complex, houses 
are supplied with unlimited hot and cold water 
by turning a tap, with unlimited light by turning 
a switch, with telephones, baths, heat, elevators 
and the like, four hundred families may live in 
one house, and then no human calculation can 
keep the account between a laborer and the house 
he lives in, but natural law makes such accounts 
automatic through a system of banking. 

When we see natural automatic accounts out 
of balance, the rich living in idle luxury, and mil- 
lions of laborers unable to find work, false con- 
clusions arise from the very complexity of the 
system, and right conclusions are only possible 
when we learn the natural law. 

Banks were not born into the body politic 
fully developed as they now appear, but have 
come to their present state by a slow process of 
development from small beginnings, starting 



148 NATUEAL ECONOMIC LAW 

perhaps from saving a loss of time in barter 
markets, with a crude token money, hke sav- 
ages now use. 

The present deposit, loan and discount banks 
are very ancient institutions as history marks 
time; the origin of modern banking is lost in 
tradition, but it is certain that banking came 
from a combination of cash and credit before 
coined money appeared. 

The early banker was an insurance agent who 
gambled on the chance of a ship being lost at 
sea, or a caravan of goods being attacked by 
thieves, the banker agreeing to make good any 
loss for a share of the profit, and he thus became 
a silent partner in every business in which his 
hinds were engaged. 

The stock in trade of the early banker, was 
that of a gold or silver-smith, and dealer in prec- 
ious stones. Money did not appear as a standard 
coin until banking had been in existence for some 
hundreds of years and it is important to remember 
that credit money was the beginning and cause 
for coining gold and silver. 

When a banker suppHes gold he suppHes the 
missing haK of goods that must appear in every 
trade. Shipping could then go forward to com- 
plete a trade when it had but half the goods the 
trade required, and by thus supplying half the 
value of goods the owner of the gold could claim 
half the profit, and thereby interest developed. 



BANKING 149 

An idle ship can have no value in present labor, 
no matter what it may have cost in past labor. 
The same is true of an empty, idle factory, or 
building. Capital must get its value by becom- 
ing active in combination with present labor, 
and banks make past labor active, change the 
potential inactive labor of the past, into kinetic 
and active labor of the present. 

To illustrate the growth and principles of bank- 
ing, and the part a bank plays in the life of every 
community, a small sample bank may be used as 
an example because the functions of every bank 
great and small are identical. 

Before banking may take root and grow, the 
financial soil must be prepared in advance by the 
circulation of a certain amount of primary cash, 
trade must have made its beginning, and labor 
in different classes, farming, trading, building, 
manufacturing must be getting cash as wages, 
and spend it to pay the cost of living. 

When a city needs a bank, the money to do a 
banking business does not come from the outside 
world. Banking must secure money in actual 
circulation in each community by mobilizing 
cash during a certain period when it is waiting, 
and in so doing banks may increase total money 
five or more times by creating a bank check cir- 
culation. 

Each community will attract a shgLre of the 
Government cash which will depend upon the 



150 NATURAL ECONOMIC LAW 

number of laborers it may profitajDly employ 
upon total wages paid, upon the time it will take 
to have wage money move completely around its 
circle, to be spent and again paid to labor. 

It takes time to earn money by labor, to earn 
and spend money and return it to the place from 
where it started. It is labor time that determines 
the quantity of cash which will be required to 
meet all demands, and it is very strange that 
students of the money question seldom observe 
this fact. 

One day's supply of cash must equal that day's 
cost of living and be paid to all kinds of labor in 
wages; it goes into pockets, and unless a quan- 
tity is on hand, to pay labor the following day 
the supply would fail. The quantity of cash 
must be able to pay total wages day by day until 
pockets are saturated, and until as much cash 
is spent in cost of living as will provide for the 
next day. This quantity of cash equals about 
j&fty days wage money. 

With fifty days' supply of cash on hand, and 
only one day's supply being used each day, there 
will be forty-nine days' supply waiting to be 
used in pockets, or in pools at banks. A fifty 
day supply of goods will accumulate in stores to 
balance the fifty days' quantity of money; one 
fiftieth of the cash, and one fiftieth of the goods 
will exchange each day. 



BANKING 151 

A fifty day supply of cash with only one day's 
supply passing from hand to hand is the most 
important element in banking, because it permits 
forty-nine days' supply to be waiting its tUirn to 
be used day by day. Banks mobilize this spare 
money, and use half of it as reserve to supply 
bank checks which are in many ways a better 
business money than cash. 

If labor is being paid but once every two weeks, 
cash will lag between such pay-days and return 
in a great swell for several days after; merchants 
buying goods in advance, to sell in sixty days, 
will also create tides in the flow of cash. 

The banker gets his stock of cash, by mobilizing 
the lagging cash in the hands of merchants, land- 
owners and others, who are primitive bankers, 
making small loans to men they know personally. 

The first duty of a new bank, in any town, is 
to secure the best business location it can find, 
where it will reach its customers with the most 
convenience, the same as a meat market or gro- 
cery; the banker has credit to sell which the 
butcher and grocer use to buy food or other 
goods. 

The only inducement the banker offers to the 
owner of lagging cash is to deposit it with his 
bank, where he will keep it more conveniently and 
return any or all of it when called for, allowing 
the depositor the convenience of issuing a bank 
check caUing upon the bank to pay the depositors' 
money to whoever he desires to pay. 



152 NATURAL ECONOMIC LAW 

The banker never fixes a time when the entire 
sum he owes will become due and payable, or 
when a bank will liquidate its debts, for if it did 
the bank itself would then be out of business. 
The first important fact connected with banking 
is found in the offer of the bank to return any 
part of each deposit when called for by check. 

The bank, moreover, will not give a depositor 
any security for the money he may deposit and 
loan the bank, while requiring the utmost se- 
curity from the same depositor, should he borrow 
his own money, instead of checking it out. The 
bank in effect says to any depositor: ^'If you 
doubt the ability of the bank to pay any, or all 
of your money, at any time, just come and get it 
and take it away." 

The pajnnent of any part of a deposit, on pre- 
senting checks by the owner or by anyone he 
desires to pay, inflates the currency by the 
amount of check money in constant circulation 
but such inflation does not advance prices. 
When a depositor can get any part of his money 
on demand he will never call for more cash than 
he needs from day to day, allowing checks to pay 
all bills except the cost of living. 

A natural law governing the circulation of 
cash, puts a very narrow limit on the need for 
cash each day, but supplies fifty times as much 
as may be used each day. This law permits 
checks to enter the daily circulation and to do 



BANKING 153 

all the work of money requiring time to pay, 
which time is strictly limited by the consumption 
of goods. 

Cash can give no time while a check must be 
exchanged for cash to have its measure taken to 
keep its value equal to cash. This step in ex- 
changing for cash introduces "time'^ in circu- 
lating money, which is most important to the 
business of the world. 

The bank check may go to another city and 
return before it is cancelled; one check may pay 
and cancel another thus creating a secondary 
circulation of credit five times as great as the 
primary circulation of cash. 

Although the banker would not at any time 
be able to pay his deposits in cash, if they were 
called, yet he is able to pay at all times with cash 
and bank checks combined; for this reason the 
promise to pay cash on demand is actually car- 
ried out in practice and in spirit, if it cannot be 
done according to the very letter of the promise. 

In the sample bank used to illustrate banking, 
we will assume a bank begins business with no 
money or capital of its own, because banking 
must conduct its business with the lag in cash in 
every community, its money becomes an insur- 
ance fund to insure payments among depositors. 

Let the sum of lagging cash the sample bank 
is able to get, be forty thousand dollars and then 
an equal sum will be in the pockets of the people; 



154 NATURAL ECONOMIC LAW 

the banks' forty thousand dollars will represent 
the moving money. The greater the number of 
depositors who bring spare cash to the bank, the 
better, within reasonable bounds, for if one man 
deposited the whole sum and could call for it on 
demand, he would have the bank at his mercy, and 
could make it suspend business at his pleasure. 

Forty thousand dollars of spare cash becomes 
the foundation of the bank's business, and it will 
be called back into active circulation every fif- 
ty days, in common with the remainder of the 
primary cash. But when checks go into use 
they supply all the needs for money except to pay 
the cost of living. Banks being required to re- 
turn the cash to circulation that can no longer 
lag, receive other cash, then beginning its lag, 
to replace it, and the banker finds he has forty 
thousand dollars cash on hand practically all 
the time. 

As soon as the bank collects and mobilizes 
spare cash in any community, all demands for 
loans will come to the bank that before were 
poorly supplied by individuals, who could only 
loan it once while the bank may loan it five or 
more times. 

Merchants come for loans to cover the time 
goods take before they reach the consumer; 
manufacturers come for money to buy raw ma- 
terial and meet payrolls, all of which demands 
are known as commercial loans, using credit for 



BANKING 155 

short periods — thirty, sixty, ninety days and 
six months. 

Commercial credit will soon establish its own 
channels, and use a certain amount over and 
over again, as goods and raw material are pro- 
duced and consumed over and over again. 

If a bank had no other depositors than the ones 
who bring the spare cash upon which all its busi- 
ness depends, it would be a poor bank indeed, 
for it could not then supply demands from com- 
merce, not counting greater demands from 
capital. 

When the lagging forty thousand dollars has 
been deposited, the advantage is all with the 
batiks' creditors; the bank owes forty thousand 
dollars, has contracted heavy expenses, and has 
no income. It would soon be forced to quit busi- 
ness if it could not loan forty thousand dollars 
of cash four or five times, and increase its deposits 
in order to do so. 

After forty thousand dollars has been loaned 
once, the deposits become eighty thousand, by 
the loans becoming new deposits, while the bank 
will have the same forty thousand dollars on 
hand to create a check circulation that supplies 
credit money. 

Forty thousand dollars loaned at eight per 
cent would bring an income of but thirty two 
hundred dollars a year, not enough to pay the 
rent, and a bank must keep expanding its loans 



156 NATURAL ECONOMIC LAW 

and deposits, if it expects to pay expenses and 
make money. 

The business limit of any bank is found in its 
ability to pay deposits in cash on demand, and 
as it cannot increase its cash above the forty 
thousand dollars that lags in circulation, that 
sum will fix the total amount of deposits it may 
take. 

The limit of a bank's deposits is about ten 
times as many dollars credit as there are dollars 
of lagging cash, so that a bank may keep building 
up deposits until they are about ten times the 
reserve cash. This limit of ten to one is not an 
arbitrary limit for each bank; it is a balance 
between cash and credit for all banks. 

Each bank will discover its own limit to loans 
and deposits, depending upon the active or dor- 
mant use of its credit. A commercial bank will 
have eight to ten times as much deposit credit as 
cash; a savings bank will average a hundred 
dollars of deposits to one of cash, while building 
and loan associations may go higher. 

The banker discovers his own limit by the call 
of his depositors upon his reserve cash; the 
greater deposits grow, the greater the demand 
upon reserve cash, and when deposits and loans 
are in excess, the cash begins to leave the bank 
to go into outside circulation. When the limit 
is passed he must contract loans and restore a 
safe balance between cash and deposits. At such 



BANKING 157 

time the banker will shift the long time real estate 
loans to investors, and clear his bank of unde- 
sirable long time paper. 

Commercial loans do not take more than about 
one fourth of total deposits, and after establishing 
commercial credit there will remain three fourths 
of deposits for other loans, which should be used 
to finance building, the same as the one fourth 
is used to finance commerce. 

When a demand for capital loans appears, a 
cost for land begins to multiply the troubles of 
the banker; money must be advanced to pay 
capital cost, but when credit is so used the loans 
are rarely paid when due, and unless a bank is 
careful, it will soon find its credit tied up with 
real estate loans that are never paid. 

When the price of land is rising, building is in 
great demand, and profits from rising land values 
increase total profits, and allow new loans to re- 
place the old, clearing old paper out of banks 
with new debts, which soon become as hard to 
carry as were the old ones, and therefore a panic 
or stringency of money follows every real estate 
and building boom from an increase in debts that 
cannot be paid. 

By shifting loans and selling mortgages to in- 
vestors banks are able to keep the more profitable 
and less dangerous commercial business, and 
therefore banking divides into its several classes, 
commercial, savings, investment and trust banks. 



158 NATURAL ECONOMIC LAW 

When a land and building boom comes to an 
end by a rise in cost of land, local banks find most 
of its credit tied up in real estate operations and 
a panic usually follows a boom, because com- 
mercial credits have been sacrificed to meet 
speculative demands. 

In the early days of development when a few 
men secure the most fertile locations without cost, 
when capital is cheap and profits great, there was 
no danger to banks in loaning money to build 
upon and improve lands, for the high rates of 
profit create new bank deposits faster than 
capital consumed them. 

When the quantity of capital, however, in- 
creases, its demand upon the commodity and 
labor market becomes enormous, with the rate 
of interest falling, and the cost for land rising, 
making building loans by banks so exceedingly 
dangerous that few banks dare venture into that 
field. 

A fall in the rate of interest will extend the 
time given the income to pay the cost of capital, 
to return the money loaned for building. A 
rate of ten per cent gives ten years' time, while 
deposits are payable on demand and banks 
should be able to collect loans in practically the 
same way, without waiting more than a year's 
time. 

Total credit money is limited, it must be re- 
newed every year, and it is this fixed limit in total 



BANKING 159 

credit which banks often experience to their terror 
without seeming any wiser on that account. 
There is the same hmit to the number of times 
total bank deposit may be loaned when loans are 
not paid, as there is to the number of times the 
cash reserve may be loaned to create the deposit 
account. 

The limit to mortgage loans, bonds and other 
investments is fixed by the total amount of in- 
terest collected each year, which can be paid on 
the debt. The limit in interest money will soon 
be reached when debts are not paid and keep 
accumulating, a panic comes over night because 
bank checks in large quantities go out of circula- 
tion. 

Assume, for example, the total cash upon which 
all credit is based is one billion dollars, and it 
turns over six times during a year paying wages 
and buying the living and thereby creating half 
that sum in profit money — profits of three billion 
dollars. 

Only half this profit may become interest, and 
when debts collect one billion dollars interest 
each year, no more debts may be created, and 
the cost of land will then prevent all building or 
rebuilding because no money to pay that cost 
can be borrowed. 

When a country reaches its debt limit the cost 
of land becomes most disastrous, for as long as 
debts may grow, the cost of land may be paid by 



160 NATURAL ECONOMIC LAW 

creating a debt. But when debt limit is reached, 
all money for building goes out of circulation, 
because no money can be had to pay for land in 
advance of building upon it. 

When capital has borrowed all the money it 
can give security for, the demand for loans from 
capital does not therefore come to an end, but 
becomes more and more insistent, especially 
when banks seek to have loans paid. 

Banks, finding no credit available for com- 
merce, when fixed debts absorb the interest 
money, then developed a new scheme to relieve 
credit stringency known as rediscounting mer- 
chant bills, or piHng new debts upon old debts 
that could not be paid. 

Rediscounting commercial paper means that 
the loan first made to merchants is used by the 
bank before it falls due to become security for 
another loan, by which the banker gets inflated 
money to make a new loan because he has no 
credit. 

To rediscount merchant bills means that the 
rediscounting bank must be given the right to 
print paper money when the limit in commercial 
credit has been exhausted. It is held necessary 
to keep the new money out of the general circu- 
lation to prevent an inflation, by which each 
dollar of new cash would become the basis for 
fifteen dollars of new debt. 



BANKING 161 

Rediscounting banks may emit a currency 
which is kept out of the wage circulation and 
cannot be used to pay the cost of Hving or create 
profits and interest, when hmited to the redis- 
counted paper and is then quickly cancelled and 
taken from circulation. 

The Federal Reserve Banking System of the 
United States is an intricate and elaborate redis- 
count system, having billions of resources, ex- 
pected to supply unlimited quantities of credit 
to finance commercial short time paper. 

Federal bank notes, however, must limit the 
usefulness of the system because they limit credit 
by the quantity of such notes the bank can float, 
which may be inflated a billion dollars very rap- 
idly to be contracted as rapidly, and in the end 
will only widen a gap that will again be filled by 
permanent debts. 

This Federal Reserve system does not and will 
not relieve the demand for capital loans, at best 
it can give but temporary reUef to commerce; 
the insistent demands from capital and from a 
cost for land will continue to work evil as long as 
debt continues. 

The ownership of land, supported by the laws 
of every civilized country has been the curse of 
the world, since history has been written on 
account of the debts it creates which destroy an 
essential and vital circulation of credit money. 



W2 NATURAL ECONOMIC LAW 

Fertile lands, poorly improved, aire held for 
the advance in value, and powers of government 
are used at all times and at all places, to bring 
about an advance in value of land for the benefit 
of a few owners without regard to the effect upon 
the public. 



CHAPTER 10 
Why Money is Stringent 

In seeking to discover principles from millions 
of facts, no field of research in the world offers 
the difficulty found in a tight money market; 
in no other field are the facts treated with more 
contempt, in no field are foolish and lying 
theories given greater prominence. 

Nineteen out of every twenty families in the 
United States experience the fact of tight money 
almost every day of their fives, but know nothing 
at all about the cause of it; they know money is 
hard to get and easy to part with. 

When millions of laborers are suddenly without 
work the fact that money is stringent becomes 
the chief news of the day, but in ordinary times 
people are not wilfing to admit they find money 
scarce, although they will admit most of their 
friends and acquaintances are worried about 
money. 

In hard times no foresight on the part of a 
business man can prevent tight money, the loss 
of markets, or falling prices for goods. All 
suffer afike when masses of labor is out of work 
from no fault of its own. There is scant sym- 
pathy for labor when it suffers from the chronic 
tightness of money which keeps thousands con- 
163 



164 NATURAL ECONOMIC LAW 

tinually out of work. It is pointed out to the 
workmen from pulpit and press, that if any man 
really wanted work and was willing to do any kind 
of work, wilUng to hunt it, and travel and seek 
and seek, he would find work, it being unthink- 
able that work could not be found in such cases. 

Why should such different points of view sepa- 
rate the laborer from the business man, farmer 
or manufacturer? The man without money is 
out of work, whether a business man or laborer, 
and is the most helpless creature in the world, 
more helpless than an animal that can lick up a 
living from the bounty of nature. 

The fear of becoming an outcast is uppermost 
in every man's mind when his supply of money 
must be spent as fast as it is received. Being 
without money is a night mare to a man's soul 
and haunts his dreams. A man will not admit 
to another a fear so deadly to his peace and happi- 
ness, not even admit to himself that he or his 
family, his wife and children can be in such grave 
danger as he finds among the very poor. 

It is not the prospect of physical suffering, or 
even death, that brings about a sickening fear of 
being without money, it is to fear a loss of friends, 
associates, fear of losing the culture and family 
life that is the basis of enduring happiness. 

Stringent money is hard to describe; it is as if 
loaves of bread became scarce by a power of 
evil that, in fiendish deHght gave to a favored 



WHY MONEY IS STRINGENT 165 

class mountains of loaves it could not use, gave 
another class many loaves to waste; to others 
all they might need, but the supply ran out and 
many could get no bread; so it is with the dis- 
tribution of money. 

Plenty of bread for all is in plain sight, but a 
malevolent spirit interferes with its distribution. 
No benefit comes to those who get more than 
they need, while needless suffering and misery 
is put upon millions. If, to relieve the stringency 
more bread is produced, it is only to discover 
that it keeps to the same unjust and unequal 
channels of distribution. 

What theory could be more comforting to the 
class who suffer from a need of money, than a 
theory that the power from whose hand money 
is being paid out is a respecter of persons and is 
therefore bound to take notice of ME, and not 
let ME and MY family suffer, for is it not self- 
evident that I am superior to the outcasts on the 
streets? 

Conceit suggests that " I am a darling favorite 
of the gods," but no truth is more certain than 
the Ruler of the Universe by law has no respect 
for individuals, and no one is above His law. 

If one hundred thousand of the submerged 
population in helpless poverty is classified and 
card indexed, according to the life history of each, 
such an index would bring out a cross-section of 
the people from the top layer to the bottom, each 



166 NATURAL ECONOMIC LAW 

having contributed its true proportion to the per- 
manent poor. 

If, for example, we have one milUonaire to each 
oijie hundred thousand of the population, there 
would have been selected one milUonaire by 
natural law to fall to the bottom of the social pit, 
and that will be true of all classes; even kings 
are not exempt. The common laborer is more 
numerous among the poor, only because of the 
greater proportion of common labor among a 
hundred thousand people. 

Money starts on the trip around the circle from 
the top, which is to say, "from the market," the 
business man handles it first, sphts it up and 
passes it along the Une to finally pay what is left 
to labor after deducting more important ex- 
penses, labor getting money last according to what 
is most needed by the market, and without re- 
gard to any who may need work or wages. 

The stringency that is of importance is one that 
seems to have been entirely neglected by finance 
writers, but is the one that must be reheved if 
labor and distribution problems are ever solved; 
it is a stringency of credit responsible for keeping 
nineteen out of twenty families in every country, 
short in the daily supply of money going to them. 

To be able to appreciate to what extent money 
is stringent it is only necessary to compare the 
markets we now have in the most prosperous 
times with a natural market, and a permanent 



WHY MONEY IS STBINGENT 167 

prosperity we should have at all times. When 
labor shall buy all that labor may send to the 
market, at a price such a market will create, then 
competition will become impossible, labor will 
never be out of work, wages must rise to the 
highest point the market can pay and profits 
reach the same high level. 

It ought to be self-evident that a natural 
market is one that will buy all that labor can 
send to it; any other plan creates a surplus the 
market cannot buy. If there is a surplus why 
is not labor permitted to buy it, and why not buy 
all of it? 

The sum of money failing to circulate, and 
therefore stringent, cannot possibly be any part 
of the cash, because cash has no way of avoiding 
circulation, no way of becoming stringent; it 
circulates as fast as natural law will permit, and 
usually turns over six times a year while credit 
is only expected to turn over once a year. 

The exact sum stringent can be easily calcu- 
lated on the present basis of production. Cash 
circulates without being stringent; hence it is 
not taken into calculation except as it will 
measure the amount of credit failing to circulate. 
The quantity of credit used each day in com- 
merce, although an enormous sxmi is not a part 
of the stringent circulation, but it becomes strin- 
gent during panic and hard-time periods. 



168 NATURAL ECONOMIC LAW 

Commercial credit supplies the machinery by 
which cash profits are exchanged for credit, that 
is cancelled once a year, but banking is expected 
to supply a permanent circulation of credit, based 
upon the time taken to cancel commercial credit 
during the year; a credit not cancelled but used 
Hke cash in paying wages to buy wealth like cash 
buys the living. 

Collecting cash profits and exchanging them 
for credit, will cancel a certain amount of bank 
checks each day, just hke cash itself is redeemed 
each day buying a living. As cash has a sixty 
day supply on hand to represent stores of goods 
waiting to be consumed, so credit must have a 
quantity on hand to represent stores of capital 
accumulated from the past. 

The lagging cash above the day's supply is able 
to keep a lagging quantity of credit redeemable 
in cash on demand, waiting to be cancelled, and 
it is this sum of lagging credit that ought to be in 
general circulation. 

Capital represents past labor; therefore, its 
credit money has no cost of living to pay, it can 
wait, and for that reason its period of waiting has 
been so far extended into the future by debts as 
to destroy a most essential quantity of capital 
money. 

Credit money, with no cost of living to pay, is 
not expected to buy a living. It is expected to 
circulate and pay a wage above the cost of living, 



WHY MONEY IS STKINGENT 169 

and when it is not permitted to so circulate labor 
cannot share in the distribution of wealth. 

If the vast mass of the laboring world is to 
share in the benefits of civilization it must do so 
from a wage rate above the standard living. 

How does the natural law regulate the supply 
of two kinds of money — cash and credit, so that 
one will stop its circulation when the cost of 
living is paid, and the other begin at that point 
and pay wages that must be spent in buying 
capital? 

The modern family selects its living from an 
enormous supply, in a market prepared by cen- 
turies of cultivation and art. Its very appetites 
have been developed so as to create the modern 
life upon which some future and immortal man 
depends. 

We easily satiate our animal wants with quan- 
tity of food, but the spiritual wants grow after 
animal appetites are satiated from variety and 
changing tastes. The desire for wealth, with 
its power and social prestige, brings an immortal 
desire that can never be satisfied by any quantity 
of wealth. 

Animal appetites once satisfied, the market 
changes and creates a demand for capital, for 
nature does not permit unlimited desires in the 
brute only, but limits the market so that only 
a standard living can be secured for the animal, 
while higher spiritual development is based upon 



170 NATURAL ECONOMIC LAW 

the accumulation of wealth, the advance of science 
and culture. 

Capital, and machinery, are intelHgently di- 
rected by natural law to multiply the power of 
labor from ten to twenty-five fold, and when 
confined to providing an animal Uving will send 
an over-supply of goods to every market. 

The curse of civihzation has ever been a diffi- 
culty of finding employment for surplus labor 
and a market for surplus goods, while capital and 
credit money keep advancing the standard of 
hving. The human law prevents the natural 
order which would distribute wealth so as to 
keep labor fully employed, with advancing wages 
to balance the advance in civihzation. 

The desire for food and shelter is easily satis- 
fied, and when once supplied makes any surplus a 
sheer waste with food to rot in the fields unless 
the demand for wealth employs surplus labor. 

There is an insatiable demand for wealth which 
pays an income, and if this demand had a money 
supply — the market would then buy all the goods 
and capital which labor and machinery could 
send to market. 

If the earth and its natural resources was made 
into an "open shop" for labor, with every fertile 
location producing one hundred dollars worth of 
capital for every ten dollars of income; if capital 
was able to sell in its market at two times cost 
then a circulation of money must arise to buy 



WHY MONEY IS STRINGENT 171 

everything labor could produce each year and buy 
at a profitable price. 

An ''open shop" earth demands the full devel- 
opment of every location in cities, on farms, in 
mines and forests according to fertiUty, using 
the most fertile before the less fertile is im- 
proved, holding in reserve lands that will always 
provide for an increasing population. 

There are a great many varieties of capital, in 
towns, cities, farms, factories, railways and 
electric power. How does it come about that 
the supply of capital can never become surplus 
and glut the market the same as goods. 

In the supply of commodities from farm or 
mine, the most fertile land will produce at the 
lowest cost, and cost will rise rapidly as the mar- 
gin of fertility falls. A fall in price of goods will 
at once destroy the profit, on the poor lands which 
will then cease to produce and force labor to find 
other work. 

But fertility of soil for the growth of capital 
works the other way around. Capital fertility 
is many times greater than fertility of soil for food 
and raw material. One acre in the center of a 
great city is a million times more fertile in creat- 
ing profit than land in grass that will support 
only flocks and herds. 

Capital has every grade of fertihty from an 
acre growing a building costing fifteen million 
dollars to the poorest lots that will support but 



172 NATURAL ECONOMIC LAW 

a hundred dollars of capital to improve them. 
In every case the cost of capital is the same 
without regard to differences in fertiUty of loca- 
tion, because capital cost is measured by a rate 
of interest, and not measured by its cost in labor 
and material. 

Each ten dollars of income should support one 
hundred dollars of cost of capital, whether one 
acre will develop capital costing fifteen milHon 
dollars or another acre will only demand one hun- 
dred dollars cost of capital. The difference in 
fertihty of soil is levelled by the difference in 
cost of improvement. 

Not only is the cost of capital held to the same 
plane without regard to differences in fertihty 
of location, but profit from the sale of capital 
is equally held to the same level; each one hun- 
dred dollars of capital cost will sell, in its natural 
market, for two hundred dollars because the 
rate of profit is always two times the rate of in- 
terest, which measures the cost. 

The rate of interest measures the same cost 
of capital on every fertile acre over the civilized 
world and unites the whole world into one single 
organism. Every hundred dollars of capital, 
whether on a most fertile or on a poor location, 
will have the same cost and selling price, which 
fact should hold wages to the same standard 
over the whole civilized world, regardless of the 
cost, or a selling price of commodities. 



WHY MONEY IS STRINGENT 173 

When the rate of interest falls as low as five 
or six per cent, it should become practically 
impossible to supply the demand for labor, at 
a minimum wage rate and the rate must rise 
to the highest level wealth and goods combined 
are able to pay. 

With the best locations once improved, the 
increase in credit money from accumulating 
profits, will get no interest and must reduce the 
rate of interest to open wide stretches of less 
fertile lands for capital at the lower rates of 
profit. When all capital, earning the normal rate 
of profit will sell for two times its cost, a new 
measure of profit arises, giving one hundred per 
cent on each location to the builder no matter 
what grade of fertility land holds. 

Nature creates a demand for capital that is 
practically unlimited, which brings into existence 
a demand for labor, limited only by the power of 
labor to produce capital and to maintain what 
must become an accumulation to transmit to 
posterity. 

The builder, able to manufacture and sell 
capital at a profit of one hundred per cent, will 
create an insatiable demand upon labor and 
compete for the labor engaged in providing the 
living, thus forcing the rate of wages for all 
labor to the highest standard the market is able 
to pay. 



174 NATURAL ECONOMIC LAW 

Although the natural law provides the money 
to pay wages at the highest rates, human law will 
not permit the natural demand to create its 
natural supply, nor will the human law permit 
the supply of capital to sell at two times its cost. 

A cost for land rises to destroy the fertility of 
each location by taking up all the profit above 
the cost of living, preventing capital from selling 
above a cost fixed by the lowest rate of wages, 
and will not allow capital to sell in its natural 
market at its standard price. 

A cost for land changes the earth from an open 
shop, where an insatiable demand for wealth 
would send wages to the highest limit into an 
earth closed against any rise in wages above the 
cost of living, and closed against the distribution 
of wealth among laborers. 



CHAPTER 11 

Parasite Evolution — A Theory of Develop- 
ment BY Joy-Cells 

Before describing the changes that must be 
made in our ways of doing business and before 
outlining a great program of construction which 
will bring permanent prosperity, it is necessary 
to explain how our separate industries and efforts 
must conform to a general plan for the advance- 
ment of all mankind. 

Human law permits individuals to use power 
over labor for selfish ends contrary to the general 
plan of social evolution, but such laws interfere 
with the natural functions of the social organism 
just like a disease interferes with individual 
health, and we must learn how to avoid diseases 
of the social organism if we would solve our 
social problems. 

It has long been the hope of students of history 
to discover why nations rise to a certain level in 
wealth, commerce and power and then either 
decay by a lingering disease or die a violent death 
from revolution, war and anarchy. 

If history could be dissected and each period 
be divided into its particular type of social 
organism there would be disclosed a parallel or 

175 



176 NATURAL ECONOMIC LAW 

similarity between the development of species 
in vegetable and animal life and a development 
of species in social growth. 

Savages leave their caves and trees to unite 
into tribes that live in huts and tents where the 
family is given a slight protection from wild 
animals and from the elements. This cell like 
protection for the tribe will compare to the loose 
cells of protoplasm in the sea that get food from 
the flowing sea water passing through cells and 
walls but which have no organized functions or 
organs. 

Beginning with savage tribes, there would be 
a very long time in history before the next great 
step was made bringing forth a much higher type 
comparable to the line separating the vegetable 
from swimming and living things in the sea. 
When the tribe learns to cultivate the soil, and 
to domesticate wild animals into flocks and herds, 
it takes on a fixed or vegetable existence and 
acquires a social body that may develop functions 
and organs for a higher type. 

After learning the advantage of cultivating 
fertile lands, and easy living on that account, 
the advance becomes very rapid from an evolu- 
tion standpoint, although famine, revolution, 
wars and pestilence wipe out millions in short 
periods, the increase in subsistence from culti- 
vating the land keeps adding rapidly to the hu- 
man population in favorable latitudes. 



PARASITE EVOLUTION 177 

From the earliest cultivation of the soil to 
our time of science and mechanics each step 
will show the rise of a new social species connect- 
ing all the nations into one chain of evolution 
seeking to create a specific type just as man was 
the end of the chain of animal evolution in the 
perfected human animal. The rise in species 
along a selected road according to laws of Divine 
Intelligence was governed by what may be called 
a standard of living for each type, the lower 
types becoming the meat and fat and vital force 
for the types higher up, and as each type becomes 
more and more complex it must feed upon increas- 
ing numbers and varieties of the lower forms of 
living things. 

Each new function for the higher social type 
had its elemental food prepared in advance by 
the type below it, and each organ of the higher 
type was similarly planned in advance by selecting 
a standard of living which consisted of lower 
forms of living organism. 

All the lower forms become meat and fat having 
higher life wound up in molecules or tissues not 
only enabling each type to reproduce its own 
species but to secrete the fat that when preyed 
upon by parasites would cause changes from lower 
to higher species according to a pre-arranged 
plan. 

When a savage tribe began its organic devel- 
opment it had a living world of vegetable and 



178 NATUHAL ECONOMIC LAW 

animal life prepared in advance to sustain the 
peculiar requirements of each human unit, but 
in addition to supplies of vital food, in all lower 
organic forms, there was stored in the mountains 
and plains and beneath the surface deposits of 
material that was to become the body of a new 
social organism in its farms, towns, cities, ships, 
railways and factories, new forces were at hand in 
steam, electricity and other powers of mechanism. 

Railway systems, factories, ships, towns and 
cities are hving things that men do not create 
although they build them. All of the factors of 
production, distribution and social power are or- 
ganized into one great living being we may call 
a Mass-Man, who never dies — ^who is immortal 
while millions of living units or cells, are born 
and die each year. 

The first simple form of organic life in the 
world of living things has but a sUght cell structure 
without functions or organs, it cannot move but 
is washed about by the waters. It has no sense 
of feeling, of taste, or smell, hearing or seeing. 
The first demand upon simple forms is to develop 
some sense of touch by which it may feel its way, 
escape danger and distinguish its food, a delicate 
feeUng or sensitiveness to touch developed all 
over the outer surface of the body. 

From this sense of touch by material contact, 
the other senses were developed. Seeing being a 
sense also of touch but not a material touch. 



PARASITE EVOLUTION 179 

which at first could only separate the light on 
the surface from the holes in the ground that were 
the secure habitation of the earth worm; other 
senses of hearing, smelling and tasting were in 
their regular order produced for new species 
according to a general plan. 

To secure its food, sea water flowed through a 
channel in a simple body, containing a small per 
cent of nutriment, compelling the whole activity 
of the body to pump sea water all the time to get 
enough food to live and reproduce the simplest 
form of organic life. 

Simple tribes are Uke such cell structures that 
only seek food, and only reproduce, but they have 
the power of reproducing the tribe on account 
of its protecting the family and providing an 
easier living for all its members. 

In the ascent from the most simple forms to 
mankind each of the types form a hnk in a con- 
tinuous line of ascent and each such link in the 
chain, developed some special part that was to 
become a Kving human being, and was necessary 
to that end making each such link indispensable 
to the end of the chain where man appears. 

There was, therefore, some essential cells that 
did not change with each type some central im- 
mortal cells that could not die nor rest nor sleep 
but must work and remember all that transpired 
in the past to again incorporate past gain into 
each new structure and this cell is admitted to be 
the unicellular protoplasm having immortal life. 



180 NATURAL ECONOMIC LAW 

The immortal part of each person has no past 
and no future, the past is stored in the hereditary- 
structure it builds while the future is held in the 
hand of the Mighty Power that plans, while only 
the present concerns the immortal man. 

It is quite beyond the power of the human 
mind to trace the work of this immortal cell unit 
of protoplasm or spark of living vitality that 
does not die or change in a million years of 
progress; it is microscopic in size but quite infinite 
in its power and capacity. 

But looking upon the whole plan, extending 
as it has over almost endless time, creating milHon 
species to express living activity, there can be 
no doubt that a Master mind and a Master 
Workman was in charge of this development in 
some way similar to that by which we create the 
lesser work of building living forms of factories, 
ships and railway systems. 

Although the mind fails to grasp the causes 
at work in the vast field of organic species, there 
is a difference when only one organism, including 
man, is being evolved in plain sight, and its history 
has been recorded in all its principal stages — the 
history of each nation. 

The same natural laws and a similar immortal 
cellular cause has had control over the species of 
social organism. The fundamental standard of 
hving and the fundamental growth of new func- 
tions and organs make advances in the social or- 



PARASITE EVOLUTION 181 

ganic structure like advances were made in the 
line from the simple cell to man. 

In the line of ascent the environment, made so 
important by Darwin in his theory of natural 
selection and survival of the fittest, was itself a 
product of that same development. No advance 
from a lower to a higher type could occur unless 
the highest type was able to live upon an ever 
increasing variety of lower forms, life can only 
be sustained by other living things. 

The vegetation of the world, in its myriad 
forms, is an environment consisting of millions 
of living types, hence that environment was a 
part of the plan by which the higher animal 
species obtained a higher standard of living. 

Eyes to see, ears to hear, smelling, hearing, 
tasting, each succeeding another, made for a 
higher and wider selection in living upon lower 
forms and increased the variety of pleasures the 
senses could give to increasing appetites. 

The same route is taken by the development 
of shipping, commerce, railways, telegraphs, 
telephones and manufacturing which are Hving 
forms connected with the parent life of the body 
pohtic through a Une of historic ascent among 
nations. 

When a savage population appears, its living 
has been provided in advance, in the thousand 
forms of vegetation and animal life in the sea, 



182 NATURAL ECONOMIC LAW 

in the air and on the land, making a great diversity 
of Hving in different parts of the earth prepared 
especially for the needs of the human organism. 

With the food supply on hand only a sparse 
population could live at ease on lands best suited 
for hunting or fishing, and increasing pressure 
from growing population forced new populations 
to migrate and to begin the cultivation of soil 
and tame wild animals to work for them. 

In the soil, ready to enter into the material 
body of the social organism, the precious metals 
were early appreciated for their future importance 
with supplies of mineral and metal the social 
organism must use in its material structure. 

We may ask why all this world turmoil through 
millions of years when one kind of life was cease- 
lessly destroying other life, and why, through 
tens of thousand of years of history miUions of 
humans were engaged in killing each other only 
to evolve a higher standard of living than that of 
birds and beasts that seem well satisfied? 

The life that gives activity to any form will 
lose its desire, and will perish unless the joys of 
living overcome the pain, the long advance from 
lower to higher types was to gather a stronger 
hold upon the desire to live in this material world, 
by vastly increasing its joy and happiness over 
its pain and misery. 

The grosser appetites for food, multiply as 
higher types develop, but when man is reached 



PARASITE EVOLUTION 183 

the same appetites are refined and demand quaKty 
where only quantity had been called for. Each 
joy is like a vibration on a string of a musical 
instrument that moves along what we call a nerve. 
Countless new strings of nerves were developed 
to play their music of joy and warn us by increas- 
ing pains, that life was in danger at the first 
approach of harm. 

What has been developed in government, 
religion, education, the fine arts, or useful arts, 
machines, steam and electricity, was but to create 
a common standard of joy in Hving, create new 
nerve lines for the whole people which add enor- 
mously to the desire to Uve, to secure a joyful 
Hving common to all mankind. 

But is this the end? Is a man only to consider 
joy and happiness? Whatever answer we may 
be incUned to make, we know of no man or class 
of men who will resist joy unless they are them- 
selves dying and have no desire to live. The 
purpose of life, where joyfulness exists, means a 
preparation for immortaUty, one Ufe after an- 
other upon this earth. 

What civiUzation would bring forth is a man 
fit for earthly immortality, where death means 
only that youth may be constantly renewed by 
another period of living with a more highly devel- 
oped personaUty, that will help along the super- 
human plan by living one Hfe after another on 
this earth. 



184 NATURAL ECONOMIC LAW 

How does the joy of living develop commerce, 
manufacturing, government, religion, education 
and culture all of which seem so remotely con- 
nected with a man^s desire to enjoy himself , which 
forces upon labor great toil and sacrifice? By 
creating parasites who get most of the good 
things and force others to work for the sponger 
and thereby develop civilization. 

As soon as savages learned to till the soil, 
its fertility gave a power to live without work. 
The joy of living at ease, and watching another 
man do all the work, soon became an overmaster- 
ing passion for certain men who Were able to 
enslave other men to work for them. 

The men who became commanders of workers 
and took all the surplus for their own joyful 
living were what we call parasites who live by 
fastening upon the body of the worker, forcing 
that worker to give most of the luxury and joy 
of life to the parasite corr^mander; these parasites 
enormously increased the number of good things 
the workers were forced to provide. 

The world made its first advance, and continues 
to advance from classes of parasites who fasten 
themselves upon the workers seeking an easy 
and luxurious living for an idle class. By getting 
the best living, and all the leisure, the parasite 
class had the first advantage from any new forms 
of food the worker was obliged to provide and 
having had leisure the parasites also could develop 



PARASITE EVOLUTION 185 

the first intelligence that came from higher 
standards of living. 

Parasites early divide into two classes, those 
who rule the slaves by fear and punishment and 
those whom the slaves worship from the expec- 
tation of benefits to come. From these great 
divisions, in parasite species, the world advanced 
in two directions, one from love, and the other 
from fear. 

The slave driver must subdue the savage and 
make a worker of an animal who had a hatred 
for all work inherent in his blood, a savage egoist 
seeking only the satisfaction of his animal appe- 
tites. The parasites who command the worship- 
ful obedience of the slave, brought into existence 
religion, the arts, the family and the spread of 
affection and obedience. 

The function of the parasite has been a great 
mystery in biology, it only being known that 
they are spongers upon the working cells, and in 
some way obtain command over them to secure 
an easy and indolent Uving, forcing the working 
cells to perform extra tasks if they are to live. 

By control over the worker, the parasite forces 
changes in the food, which it may demand, for 
its higher standard of Hving and for its growing 
intelligence but it must not overstep the natural 
limit because the worker must also have a small 
share of joyful living and must advance more 
slowly along a line marked out by parasite control. 



186 NATURAL ECONOMIC LAW 

From this parasite control over production and 
distribution all the functions and organs of the 
body politic, farms, factories, towns and cities, 
and finally all the workers themselves are able 
to obtain most of the advantages that at first 
were only enjoyed by a small parasite class. 

The parasite seems to obtain command over 
the worker by its abihty to attach to some non- 
vital part of the structure, but to a part that is 
of the utmost importance in creating joy, which 
part consisted of an accumulation of fat, set aside 
as a reserve, from which the joyous sensations 
and appetites arise. 

The parasite lives on select fat cells, that some- 
how control the pleasure nerve centers or influence 
them to play upon the nerves, such fat cells, being 
a reserve of vital force, from which the whole 
body enjoys rest from work, and recovers its 
muscular and vital power, they are the reserves 
of hope, of love and ambition, and unless the 
worker will increase the supply of fat over the 
amounts consumed by parasites, it will have no 
rest or joy in Hving. 

Fat deposits control the organs of vitality and 
fecundity and regulate the supply of energy to 
all parts of the body, give pleasure to all appetites 
and control the pleasure of the five senses, hence 
such fat is of the most compelling importance in 
the advance of mankind. 



PARASITE EVOLUTION 187 

The owner of capital, which is a fat deposit, 
from its collection of interest money, is able to 
live without work but is not necessarily a parasite. 
Units of interest money are the vital cells the 
parasite controls and such units may be and are 
designed to be of the greatest importance to the 
happiness of mankind. But while one class of 
fat is thus essential to all the joys of Hving, its 
owner may divert it and introduce a disease 
parasite, to become a disease building fat, instead 
of spreading joy over the whole body. 

When the joy of living is postponed, the fat 
deposit will not increase the reserve energy, but 
will consume itself in merely piling up more 
diseased fat, such disease cells are seen in interest 
dollars giving vitality to a debt which becomes 
the cause of all manner of other diseases which 
the body seeks to avoid. 

It is quite difficult, if not impossible, to observe 
the tastes and manners of a microbe under the 
microscope, but when the field of vision is multi- 
pHed by some milUons of diameters in the social 
organism, the tastes and manners of a parasite 
milhonaire or other parasite class is more easily 
recorded. 

The rise of the rich, as a class, makes the 
romance of history, for this class became the 
foundation of kings and dynasties, the owners of 
capital and wealth, the commanders of armies, 
the controllers of the fertile lands, owners of all 



188 NATURAL ECONOMIC LAW 

labor could produce above its own living. Manu- 
facturing and commerce developed to supply rich 
land owners, merchants and bankers, with classes 
of goods the workers could not then hope to 
enjoy, but which, in later times, have given a 
common luxury to millions of people which kings 
did not have a century ago. 

The commanding savage, as soon as a tribe 
obtained a settled existence, secured the best 
lands, became a noble and made other savages, 
conquered in war, his slaves instead of taking 
their lives as was the savage rule of warfare. 

By forcing slave labor to develop the best 
lands and to do other work, to serve the luxury 
of a parasite class, the total living enormously 
increased in both quantity and variety, population 
grew fast and furiously expending itself by inces- 
sant wars over the rich lands, wars between 
parasite classes — "A rich man's war and a poor 
man's fight." 

Slave labor, under the lash of parasite com- 
manders, developed shipping and commerce, made 
great estates upon rich lands, built towns and 
cities where art and industry flourished, invented 
machines, improved harbors, discovered science 
and made inventions. Slaves were warriors, 
teachers, merchants, painters, artists and archi- 
tects, for the exclusive benefits of parasites, but 
later to benefit the whole social organism. 



PARASITE EVOLUTION 189 

The failure to obtain joy money by labor, 
comes from a failure of labor to get its share of 
fat, which means a rate of wages having a fat 
surplus above the standard living which is fixed 
for the social organism. There is no failure in 
the supply of joy producing dollars, and no 
reason why the rate of wages should not rise to 
give the surplus of fat, except the fact that a 
disease takes the fat dollars for debt to bring 
about misery, instead of allowing fat to increase 
the joy of living for the milUons. 

We may imagine how a slave submits to his 
master when the master controls the living of 
the slave, although he may no longer whip or 
otherwise drive him to work. When the favor 
of the master may make living an easy and 
joyful one, or a life of misery for the worker, he 
will be a slave commander with slavery abolished 
by law. 

The two intense desires of each organic body 
that demand satisfaction before lesser desires are 
called up are the desire to Hve as joj^uUy as may 
be, and the sexual desire to reproduce the species, 
it is the satisfaction of these two main appetites 
that keep people aware of the blessings of 
existence. 

The appetite for food grows with what it 
feeds upon, and when quantity satiates, then 
quality appears to refine the taste, and great 
systems of manufacturing, transportation and 



190 NATUEAL ECONOMIC LAW 

trading grow to minister to appetites that merely 
enjoy the physical delights of Uving. The organs 
of sex and reproduction are at the base of all 
the higher desires, responsible for the love of 
children, for the estabUshment of the home, for 
order, for law and government, for education and 
religion, for music and art, for love and honor. 

Give the parasite commanders a control over 
the joy cells they may direct the appetites, may 
direct the sexual and reproductive functions, 
thereby the parasite has command over the 
development of species, over the food supply 
for each higher type. 

It is quite plain that one class of parasites is 
most beneficial, and it may be taken for granted 
that, by their command, hfe is made easier and 
more joyful for the vast body of workers, although 
parasites live without working. 

Parasite commanders must themselves be di- 
rected along a fixed line if the natural order is 
to prevail although they only seek to gratify 
their own desires, but selfishly they may interfere 
with a general plan, and when they do so interfere 
they become disease breeding forces to endanger 
life, and force the other cells to fight such parasite 
growth. 

We have no evidence of good parasite control 
over the appetites and reproductive organs that 
are vitally important to the healthy body, but 
we are becoming daily more familiar with what 
is known as disease breeding germs and microbes. 



PARASITE EVOLUTION 191 

The disease germs are so minute that a thou- 
sand of them cover but an inch, yet they are so 
deadly that miUions of human beings may perish 
in a week if they multiply and feed upon the 
vital cells. The scientific world is rapidly ac- 
cumulating a great store of facts concerning 
disease breeding microbes, but we madly crave, 
and desire a knowledge, of the health and joy 
producing kind, so that we may have a serum to 
inject health and joy into the body rather than 
eject a milder disease to prevent a more fatal 
malady. 

Disease germs seem to have the function of 
holding the developing and joy inspiring cells 
to their particular hne of work, and unless the 
joy makers keep to their task the disease makers 
will destroy the entire species, and force a new 
start in evolution. 

Disease germs have power to change health 
tissue into other forms that bring dissolution and 
death, by diverting the fat cells from their regular 
functions, but they may only do so when the other 
members of the joy family fail miserably in their 
duty. 

The rise in civilization, from the lower savage 
types, to the more and more highly civilized 
and cultured, came from changes in the standard 
of Hving, which included highly developed foods, 
art, architecture, travel, electricity and the neces- 
sary work for vast suppUes of capital which 



192 NATUEAL ECONOMIC LAW 

created functions for the organism, thereby be- 
coming a higher species. 

Each advance from lower to higher type was 
made at a heavy sacrifice of Hfe among the com- 
mon people because it had to come by conflict 
with parasite classes that were a constant menace 
to each new advance. Although a class of para- 
site commanders would make a new type much 
more able to live, yet parasites so resist a change 
to the next higher that disease had to bring 
about the defeat of one parasite class and allow 
another to replace it for the next step of evolution. 

The first great parasite class was military, 
appearing as a protection to the whole body, 
but soon developing its special germs, living in 
glory as spongers, without adding to the general 
welfare and efforts had to be made to curb the 
military structure, and fighting against the mili- 
tary caste, came as a disease of militarism which 
must be destroyed to make the state immune. 

The most important truth recently developed 
concerning germ diseases is that the disease 
develops its own permanent cure in those who 
survive, by making changes in the blood by which 
man becomes immune for all future time to its 
more deadly effects. 

The present mild diseases of childhood, for 
example, like measles and chicken pox were at 
one time terrible scourges of death among thickly 
populated savage tribes, and the suffering of our 



PARASITE EVOLUTION 193 

ancestors, from such contagions, made the fol- 
lowing races able to resist. 

Each of our parasite classes carries its own 
cure, so that the body may overcome disease by 
making itseK immune. The world is now seek- 
ing to aboHsh war by suffering from the the great- 
est war disease in its history, seeking to abolish 
the parasite war classes of the world and destroy 
military disease. 

The church developed parasite classes in the 
same way which became a danger to civilization, 
time after time in history, religious wars, and 
reform religions were but an effort on the part 
of the social body to save itself and become 
immune to evil effects of a parasite church. 

Thus the great disease that brings about a 
concentration of wealth, may destroy this civili- 
zation, as it has destroyed all former nations, it 
creates numerous classes of reform parasites in 
drink reform, vice reform and a multitude of 
others, by which a small body of microbes claim- 
ing superior virtue, get an easy living out of the 
disease breeding cells, while the main body strug- 
gles as best it may against pests of this kind in 
the hope of becoming immune by discovering 
the natural laws of progress and health. 



CHAPTER 12 

Landlordism 

If the reader could go back into history and 
trace the evils of property in land in China, 
India, Egypt, Greece and Rome; into feudal 
Europe and down to modern times with its wars, 
slavery, the fall of empires, its crimes, poverty 
and misery, its mystery would remain for the 
land system of every country was the breeder 
of every parasite class which civilization was 
forced to battle and then endure. 

The world is being confronted by a new stand- 
ard of living after centuries of change. Parasite 
classes introduced steam power, electricity, fac- 
tory systems and telephones, created new appetites 
and desires among milUons demanding higher 
wages and greater markets. The difficulty is 
growing greater all the time to find employment 
for millions so that they may live at any standard, 
although the world is burdened with wealth. 

The opposing forces in our civilization cannot 
compromise, the activity of production, railways, 
factories and lines of distribution demand mil- 
hons upon milHons of consimiers to satisfy the 
machinery of modern civiHzation, wages must 
rise to supply our markets with consumers and 
194 



LANDLORDISM 195 

consumers must buy capital or civilization will 
fall. 

By the laws and habits of every people land 
was always recognized as being the only real 
property — real estate — all else was subject to 
decay while the land remained a part of the 
imperishable earth, and when it was bought and 
sold it became more desirable than any other 
property; it was the least suspected of evil while 
creating practically all the troubles of civilization 
from parasite classes that thrived upon the fer- 
tility of farm, forest and mine. 

Unless land is treated as private property it 
will not be cultivated or improved, the profit 
from its fertility, provides an easy living and the 
land owner becomes an impelling force that 
brings about the change from savage to civil 
life. Landlordism created slavery, tryanny, wars, 
poverty and crime. 

Labor products must be private property if 
money is to circulate that will increase and 
distribute a higher standard of living. The 
problem to be solved is to retain the benefits 
of land owning and yet prevent land itseK from 
having a value in money, based upon different 
locations or differences in fertility of soil or mine. 

The value of capital is not measured like the 
cost of living by its being directly exchanged for 
an equal value in concrete money or by having 
a quantity of standard money to balance an equal 



196 NATURAL ECONOMIC LAW 

store of goods waiting to be sold; capital is meas- 
ured by the amount of profit it may take from the 
sale of goods at a standard price in the market. 

The money to build capital must be advanced 
from some source and cannot be returned until 
a sum equal to its cost has been collected in profits 
taken from sales of goods and ten or more years 
may pass before profits will return the cost of 
capital. The power to control advance money 
for building will solve our problem of private 
ownership and avoid the evils of property in 
land as we experience them now and in the past. 

If the circulation of money is limited to that 
particular purpose; if no money may be had to 
buy land, and if land cannot become security 
for the future return of its own cost; if security 
for money advanced to build must come wholly 
from the improvements upon the land, then, in 
that case, land owning can do us no harm. 

Every government should regard the circulation 
of money as being its most important duty and 
each government should provide as much money 
to develop lands or build capital as the fertility 
of the land will return within the interest period. 

If a supply of money, to improve land, was 
looked upon as being of equal importance to 
the fertility of land itself, a great advance would 
be made in government and in the solution of 
social problems for all the benefits of capital 
would then remain, while land itself would have 



LANDLOKDISM 197 

no cost in money, debts could not arise and 
business would have a supply of money to pay 
for all capital or goods labor could send to market. 

Had banking been established to encourage 
the rapid development of agriculture and capital, 
as well as commerce, had loans been made freely 
to meet the cost of improving lands without 
permitting loans to buy land, had the value of 
the improvement become security for money 
advanced to make improvements then no rise 
in value of land would ever have taken place, 
but capital itself would have advanced in price 
according to its fertile location. 

It is quite plain in cities, that difference in 
fertility is shown by different heights and value 
of buildings, commencing with the most valuable 
in the business sections and growing less until 
buildings disappeared where the city merges into 
the country. 

If every location was improved to the limit 
of its fertility, the skyline would grade from the 
highest and most valuable in the center to the 
less valuable at the outskirts, and buildings would 
sell at a price fixed by the income, without taking 
any of the income or any part of the selling price 
for the value of land. 

The most important government undertaking 
is to provide money by billions to develop capital 
in all its branches, to improve millions of small 
farms, and to finance homes without permitting 



198 NATURAL ECONOMIC LAW 

a cost for land to take any part of the money 
holding all the income to return money advanced 
for purely building or capital purposes with no 
money to pay for land. 

It is not expected that Governments should 
loan money or own capital, but merely act as 
trustee for the borrower and for the banking 
system. All loans must be made payable on 
demand, and the capital created must earn 
interest on two times the loan and two times 
its cost. 

A loanable fund for commerce is required equal 
to the entire supply of goods passing from the 
producer to the consumer, which is revolving fund 
to be repeatedly loaned on the commercial market 
to distribute the living to the whole people. 

No matter how great the quantity and variety 
of farm products or manufactured goods there 
should be no difficulty in meeting all demand for 
money to market goods, the profit from sales of 
goods should supply commerce with all the credit 
money it has any use for. 

When lands must be improved with capital, 
at great cost in many cases, railway systems, 
canals, harbors, factories, mines, roads, cities, 
and public utilities the cost each year for new 
capital is expected to equal the cost of living, and 
a quantity of money is provided by natural law 
to meet that expense, but the way has never been 
discovered to use credit for capital as the credit 
for commerce is used. 



LANDLORDISM 199 

There is no mystery about a revolving fund 
of cash or credit, it must be used over and over 
again, but it needs some elasticity so it will not 
remain a fixed measure but will allow goods to 
increase and allow population to grow from thou- 
sands to millions of men. 

Manufactures can throw almost endless streams 
of goods into markets without regard to season 
or climate, and a form of elasticity is required 
to permit a limited quantity of cash money to 
keep pace with the expanding markets for goods 
while prices rise. 

Cash may revolve as fast as it can be spent 
and earned and spent again, but unless credit 
can be used to expand the volume of cash it 
could not provide for increasing supplies without 
a loss of price, or take care of an increasing 
population without a decline in wages. 

Every time cash revolves it measures the cost 
of labor, but sets aside a surplus from fertiHty 
of soil; a profit which will equal half the cash, 
and when cash revolves more than once a year 
it will set aside half its own quantity every time 
it revolves. 

Property in land does not interfere with the 
circulation of cash because it also must get its 
income from the surplus fertility of soil, it cannot 
take any of the cash money, and for that reason 
its interference is all the more difficult to locate. 



200 NATUEAL ECONOMIC LAW 

To enable cash to revolve more than once a 
year, it is necessary to spend the profit it creates 
as credit money and to add that sum of credit 
to the consumer's market; such profit will thereby 
generate its own quantity of credit money as 
fast as it is taken from the sale of goods. 

When the cost of accumulated capital will equal 
the sum spent for a living in one year then capital 
will collect half that sum as profit and it will be 
returning its own cost in one year because the 
living will sell at two times cost and capital will 
thereby establish a base rate of profit of one 
hundred per cent. 

This rate of profit of one hundred per cent will 
make each profit dollar equal to one cash dollar, 
and each dollar of profit will sell for one dollar 
of cash which is to say the money buying a living 
without work will equal the money that must 
be worked for to buy a living. With capital able 
to pay for itseK once a year, the owner will dis- 
cover that he may rapidly become very rich by 
merely spending excess profits to increase his 
quantity of capital which he will do wherever 
the fertility of land is open for capital develop- 
ment. 

The hmit in the total profit, being half the 
revolving cash, must in some way provide more 
credit money to supply interest and profit for 
the rapid increase of wealth. When the rate of 
profit is very high the increase in credit or elas- 



LANDLORDISM 201 

ticity comes from dividing the rate of one hundred 
per cent profit or one dollar credit for the one 
dollar cash each year so that half a dollar 
credit will balance a dollar cash when capital 
doubles, or ten cents of profit will pay interest 
in one cash dollar when wealth accumulates until 
it is ten times the annual sum spent for a living. 

Economic law measures capital according to 
the cost of living, and makes it depend upon that 
cost, at one hundred per cent profit, the quantity 
of capital, will balance the cost of living for one 
year with credit money then balancing cash, the 
amount of interest supplied will create as many 
credit dollars as there are cash dollars. 

When total capital grows to become double 
the cost of living for a year, the profit of one 
hundred per cent, forces one dollar of cash interest 
to spread over two dollars of capital and the rate 
must fall from one hundred to fifty per cent. 

The quantity of capital will thus continue to 
increase based upon the annual cost of living 
until the necessary reduction in the rate of interest 
will bring the increase of wealth to its limit, at 
which time wages should have risen to the highest 
rate the public is able to pay. 

Capital will improve lands of less and less 
margin of fertility as the rate of interest declines, 
because credit money will accumulate faster than 
capital accumulates and this credit money will 
get no interest unless it develops new capital on 
less fertile lands. 



202 NATURAL ECONOMIC LAW 

According to this rule there seems to be no 
limit to the growth of capital and wealth except 
the limit fixed by a decline in the rate of interest, 
if cutting the rate from one hundred to fifty will 
double the quantity of capital, then cutting the 
rate from fifty to twenty-five will again double it. 

Apparently the rate of interest could be cut 
indefinitely, be cut to infinitely small rates, with 
the quantity of wealth growing to infinitely great 
proportions, but the natural law must set some 
limit to the growth of wealth and to the fall in 
the rate of interest which is a limit between the 
finite and the infinite in the material world. 

It should be clear as wealth accumulates it 
demands labor to maintain and operate it, rail- 
ways, for example, when building gather labor 
from agriculture and other fields to change them 
into labor for railway systems when complete dj 
and in doing so take more labor to operate and 
maintain railways than was originally used to 
build them. 

The quantity of wealth will therefore find its 
natural limit when the labor consumed by re- 
building begins to lower the standard of living, 
in such case the order of progress would be 
reversed, for then capital would be defeating the 
very purpose of its existence, and the world would 
be going backward instead of forward. Wealth 
must stop increasing where it supplies the highest 
possible standard of living. 



LANDLOKDISM 203 

If capital may be selfishly increased to merely 
build great fortunes for the rich, it may grow in 
quantity by enslaving labor without increasing 
the joys or without benefit to the people, and in 
this particular Landlordism may work tremen- 
dous evil. 

The natural growth of capital is an inspiring 
picture of the munificence of natural law, and 
natural resources, for the benefit of mankind, but 
the interference with this natural order, by the 
rise in cost of land has ever been the great curse 
of civilization. 

Capital cannot collect its profit from the cost 
of Uving unless it increases the standard of living, 
creating new desires of every kind, not only from 
new varieties of food and shelter but, also from 
new social life, education, government, travel and 
communication. 

If mankind is forced to work longer hours to 
maintain an increased total wealth, it will get 
little above an animal living, but as capital 
develops in quantity it must develop the machin- 
ery that will ease labor, will make the life of 
labor less monotonous, will create more and more 
intelligence, will give more rest and fewer hours 
of work while producing a greater total of product. 

Unless wealth provides leisure it will have little 
value in promoting a higher spiritual life, or higher 
culture and on that account leisure becomes the 
chief concern of natural law, which sets a limit 



204 NATUEAL ECONOMIC LAW 

to the decline in the rate of interest and a limit 
to the growth of accumulated wealth, the rise in 
cost of land would defeat this very vital purpose 
of civilization. 

Leisures is something that must be bought and 
paid for. One must live while at ease and live 
at the high standard capital is expected to secure. 
Where is money to buy leisure to come from, and 
how is that money to be distributed so the great 
mass of people will share its culture and blessings? 

When capital increases in quantity it takes 
more and more of the surplus from fertile lands 
and calls for more and more labor, if it was per- 
mitted to grow without limit, it would stop at 
a point where it would enslave labor, and at the 
same time give the owner of wealth nothing but 
the burden of managing it while its entire income 
was being consumed by its own cost of mainte- 
nance. 

To avoid a catastrophy of that kind the natural 
law divides the rate of profit into equal parts so 
that half the income may be set aside as a rate 
of interest which will buy leisure and one half 
provide a sum of money to return the cost of 
capital. 

Interest represents a certain quantity of money 
each year set aside to buy leisure, and it is a 
simple matter to calculate just how much leisure 
interest money is permitted to buy since it is 
limited by half the profits taken from the cost 



LANDLORDISM 205 

of living or one-fourth the total living may 
become leisure, for the owners of all the wealth. 

One-fourth total living set aside for leisure, is 
a rule which holds no matter to what level the 
standard may rise, and it will not increase by 
lowering the standard. Where the rate of interest 
is very high, when countries are newly developing 
and there is a low standard of living, the excess 
of easy living money may not be consumed but 
will be used to increase total wealth. 

It should be quite clear that if one-fourth total 
living is set aside as a surplus to buy leisure, the 
cost of leisure must somehow be carried as a 
higher cost of capital, to stop the growth of capital 
at a point where it will carry the leisure money, 
and not go beyond that point. 

The cost of easy living is forced on capital 
by its being required to collect a net income equal 
to two times its own cost, allowing one-half such 
income to be spent for an easy living while the 
other half is consumed in marketing capital and 
in reproducing its cost. 

Capital has its cost of labor, and a cost of 
labor to maintain it, which labor must live at an 
ever increasing standard and on this account 
capital must carry an increase in wages as its 
own quantity grows. The increase in wages 
coupled with the decline in the rate of interest 
brings total wealth to a limit in quantity, so that 
growth stops at that line wher^ the standard of 



206 NATURAL ECONOMIC LAW 

living reaches its highest level with the highest 
wages and this line is determined by the lowest 
point in the fall of the rate of interest. 

Capital earning two times the rate of interest, 
selling for two times cost, will increase in quantity 
as the rate of interest falls, and the drop in the 
rate will open lands of a lower margin of fertility 
to be developed. This increase of capital from 
a fall in rate of interest should fully employ all 
labor, and send the wage rate to where the rise 
in wages will absorb the selUng price of two 
times cost. 

Two times cost is a double cost so as to provide 
the leisure money that has no cost to the spender. 

One cost of capital is limited by the money that 
will buy a living for those who work and the 
other cost will buy a living without working. To 
keep this line distinct one cost of capital is paid 
for in the cash that must buy a living, by working, 
and the other cost is paid with credit money 
earned by past labor which has no cost of living 
to pay. 

Our labor problems arise from the fact that the 
rate of wages may stop where it will only include 
the money that buys a living, and will not rise 
to a point where a surplus wage may buy capital 
and thereby include laboring men in a leisure 
class. 

As capital grows in quantity, the fall in the 
rate of profit is brought about by the fact that 



LANDLORDISM 207 

the cost of maintaining and building capital is 
taking more and more of the surplus labor not 
used in providing the living, leaving less and less 
labor to rebuild and operate capital. 

If, for example, the lower limit in the rate of 
profit is ten per cent and half this or five per cent 
is the lowest rate of interest, the calculation for 
wealth, wages and profits in the United States 
would be as follows : 

Taking statistics for the total supply of cash 
in round million dollars, and using only millions 
as units, the measuring cash is found to be five 
thousand million dollars, or five billion of primary 
money which is limited to paying the cost of 
Hving. 

Five billion cash in the United States, with its 
highly developed industrial, railway and banking 
system, will turn over six times in one year and 
thirty billion dollars will be spent by labor for 
a living which cost fifteen billion dollars to pro- 
duce and will create fifteen billion profit from 
which the owners of capital get a living. 

The fifteen billion dollars profit collected from 
a cost of living, was mainly spent in the past to 
create three hundred billion dollars worth of 
capital, which labor must now work hard to 
maintain. If interest rates are too low the 
maintenance of capital will consume all its rent 
or other income by wear and tear, leaving no 
margin for living without work, or allow capital 



208 NATURAL ECONOMIC LAW 

to fall in ruin from want of repair when the 
owner spends the income. 

If capital is to pay a net income of five per cent, 
there must arise an additional fifteen billion 
dollars of profit outside the cost of living, and 
this profit must come from the sale of fifteen 
billion dollars of capital each year for thirty 
billion dollars to create a new profit from the 
sale of capital at two times cost equal to the 
profit from the sale of a living and two times cost. 

When the rate of profit falls to ten per cent, 
it not only measures a total capital ten times 
as great, but it measures the consumption of 
capital at one-tenth the total showing that thirty 
billion dollars worth must be produced and sold 
each year in the United States to maintain total 
wealth. 

If capital had grown according to this natural 
law, if each location had created ten times its 
rent in value of capital with no land value, there 
would be no rambling shacks of cheap buildings 
on valuable locations, no ruins of three and four 
story buildings on locations that should grow 
structures twenty stories high. 

Where the annual income is fifty thousand 
dollars, the cost of building at that location 
should have been a half million dollars or ten 
times the rent, and no building worth twenty 
thousand dollars should be permitted to collect 
two hundred and fifty per cent in rent. 



LANDLORDISM 209 

The natural growth of capital would have been 
carried from the city to the surrounding territory 
by a similar improvement of small farms, and 
it is not hard to imagine how wages would reach 
the maximum level and include the value of 
capital at two times the cost with the earth an 
open shop for the builder. 

It should not be difficult to follow out the 
tremendous money and other damage inflicted 
by a rise in cost of land replacing a natural growth 
of buildings on every fertile location. 

Capital will not build unless it is able to collect 
two times the rate of interest, and when profits 
grow from the advance of civilization and from 
the increase in population, the rise in rents per- 
mits the best locations to collect from one to 
two hundred per cent each year upon cheap 
buildings of an old and lower standard. 

The demand for more and better buildings 
should grow as rents increased and such new 
buildings should sell at twice cost, but the rise 
in cost of land takes up the gain from higher rents 
as the rate of interest falls, therefore capital is 
not permitted to grow to its natural limit because 
the cost of land takes most of the higher rents. 

Land must be secured in advance of building 
upon it, or improving it, and the competition of 
builders for the most profitable locations, is based 
upon the actual cost of labor at the wages fixed 
by the cost of living. Land may keep advancing 



210 NATURAL ECONOMIC LAW 

as profits or rents increase and therefore wages 
cannot rise to balance the rise in cost of land 
or rise above a cost of living. 

Unless wages do rise to include the price of 
capital at two times cost, the income of capital 
will finally be limited to a sum that will only- 
pay for its own maintenance, and leave the owner 
an empty shell. How does it happen, therefore, 
that in spite of the rising cost of land capital was 
somehow permitted a very great development? 

When the profit taken from the sale of goods 
is much higher than the sum required to maintain 
a small total of capital and when half the income 
will not be taken by the owner to live without 
working, then, given time, the excess profit will 
be used to increase the quantity of capital, for 
land owners, bankers or merchants, but that 
increase will stop when interest falls to its lower 
level. 

The banker may safely loan money to build 
or to buy land, when the income will repay the 
loan in one, two, or three years. Speculation in 
land will help building, for when the rate of inter- 
est is cut in half the price of land will double 
provided it can get an income from a building 
that will cover the interest on its cost, allowing 
the excess profit above interest to support an 
increase in value of land. 

When a country is developing its manufactur- 
ing, building railways, and increasing its popula- 



LANDLORDISM 211 

tion, real estate booms soon develop from the rise 
in price of lapid brought about by a fall in the 
rate of interest which gives the builder and 
speculator an opportunity to borrow money to 
cover the cost of building and thereby increase 
the quantity of capital. 

The cost of maintaining capital will rapidly 
consume the total income when the rate of interest 
is low, and as the land value mortgage demands 
interest based upon capital selling at two times 
cost, the time rapidly comes to every country 
when capital income will not pay, both interest 
and cost of maintaining it. 

The principal of a mortgage can never be paid 
because there is no rise in wages by which capital 
may sell at two times cost and revolve a quantity 
of money to buy it, therefore wealth soon begins 
concentrating to the money lender. 

The difference between what the natural law 
would give capital when wages are permitted to 
rise to equal its price at two times labor cost, and 
when the cost of land limits the wages to a Uving 
must be filled in by the increase of debts, until a 
crisis and panic appears, when debts must be Hquid- 
ated to allow business to proceed on a narrow basis. 

As was well said by a candidate for president 
in discussing an economic question ''It is a con- 
dition and not a theory that confronts us," so 
with the rise in cost of land, the laws making 
land private property and laws supporting debts 



212 NATURAL ECONOMIC LAW 

make conditions in the labor and capital market 
as we find them, and how are we to overcome these 
conditions? 

Dividing lands among cultivators fails time 
after time in the history of the world, with no 
benefit to the cultivators who must have markets 
in which to sell their supplies. Labor must have 
profitable prices in markets which will create 
capital, must have the machinery to work it 
and the leisure to develop a higher man than 
the brute. 



CHAPTER 13 

The Way Out 

If nations at war may sacrifice billions of 
money, ten times as much capital, millions of 
men killed in the prime of life, to save themselves 
from an invading army, what may be urged 
against spending billions to save civilization from 
its own fall to save a people from the barbarism 
that must follow a failure to fully employ labor; 
to save civilization from the continued concen- 
tration of wealth that destroys every nation fail- 
ing to solve the problem of distribution. 

The cure for the diseases of society is work, 
and more work, to change slavish, poorly paid 
occupations into honorable, well paid creative 
tasks, to make labor share in the benefits of wealth. 
Each nation must create its own work for the 
labor of man, animals and machinery; it must 
reach markets all over the world and keep enough 
money in general circulation so that a permanent 
commercial prosperity will become the rule all 
over the world. 

To find work in unlimited quantity and send 
wages to the highest point, to keep profits at 
the highest level, to circulate the utmost quantity 
of money and do all the business labor can supply, 
does not call for a socialist government, nor for 
213 



214 NATUKAL ECONOMIC LAW 

any radical change in any existing form of govern- 
ment, but does call upon us to remove the restric- 
tions that debt and cost of land impose. 

Billions of debts consume millions of dollars 
of cash interest each year, and thereby hold out 
of circulation the money debt promises to return 
to circulation in the future which should never 
have ceased circulating. 

The natural law requires each dollar collecting 
interest to circulate once a year, and labor loses 
every year the billions that debts make dormant 
and idle, promising to be paid in a future that 
never matures. 

If the debts of the world were suddenly paid, 
the money they promise, would bring tens of 
bilKons into the market in the United States alone, 
and would seriously embarrass business with an 
inflation of credit money. 

But to make the billions of debts payable on 
demand will supply the market with credit as 
fast as it could be used, permitting wages to 
advance without inflation, and would bring 
permanent good times everywhere. 

It is, however, too uncertain an undertaking 
to try and educate the people to change the 
present system of debts into a new system of 
doing business on a cash basis and wait on that 
change to solve our problems, hence, it becomes 
the easiest way to leave old debts alone for the 
time being and concentrate attention on doing 
new business on a "pay as you go" basis. 



THE WAY OUT 215 

The way out is to somehow increase profits 
by employing more labor, by giving more and 
more profit to production, to open greater and 
greater fields of activity, until the money now 
held out by debts is bound to return to general 
circulation by building a better and more beauti- 
ful country to live in, offering a better security 
than present debts and thereby make bonds and 
mortgages obsolete. 

Government in the near future must change 
radically from its present form, its laws need not 
change radically but its representatives must 
become trustee to guide new expenditure involv- 
ing sums that are only comparable to the cost 
of war. 

No one will dispute the conclusion that a 
trained chemist must command the work in his 
special field but in the more difficult field of 
apphed finance and industrial growth any Tom, 
Dick or Harry that happens to be elected to 
office is expected to suddenly become Heaven 
endowed with a special fitness for government 
service. 

Although men of trained knowledge and experi- 
ence are found in every business and industrial 
field where power is lodged in the hands of one 
man, yet in affairs of state where more vital 
power must be lodged in the hands of man there 
is a minimiun of training or technical skill, and 
a surprising ignorance, incapacity and egoism, 
when it is not corrupt. 



216 NATURAL ECONOMIC LAW 

To solve present day problems the wages of 
common labor must rise enormously, not only 
to a high standard of living but must ca*rry a 
surplus to pay rent and buy capital. 

Such a rise in common wages demands billions 
more money each year be spent in the wage 
circulation, and billions cannot get into circula- 
tion unless some plan of spending is put into 
action, and that plan must find profit for every 
dollar so spent. 

If the people of the United States can unite, 
sink all former differences of politics, theories of 
competition, free trade, taxation, monopoly, trust, 
labor, wages and money to save the country in 
a distant war, they should not fail to unite to 
save the country from a similar fate when that 
work will be a blessing to all concerned and be 
profitable. 

We cannot remove old and hide-bound restric- 
tions on business unless there shall come a unity 
of purpose to solve our problems, a purpose to 
finally settle the labor question when it has been 
shown that it will become a very profitable 
operation. 

It would seem an easy task to tfall upon debts 
to return the money they promise to pay, and 
to prevent new debts being contracted in the 
future, because each debt is secured by two times 
its value of capital. Debts cannot be paid in 
cash, and the credit by which they might be 
paid is not on hand. 



THE WAY OUT 217 

To pay debts with cash according to the con- 
tract, is utterly impossible; when the debt was 
created the borrower did not receive cash, but 
did receive a credit he could convert into cash, 
and we may again resort to the same situation, 
and pay in credit as fast as owner will need to 
convert credit into cash. 

There will be no trouble in finding bank credit 
to make debts payable on demand, or to keep 
the country free from debt in the future, to do 
business on a cash basis. 

Business on a cash basis means much more 
than will appear at first sight, there will be no 
competition in a market where all the goods that 
may offer will find buyers at a profitable price; 
every price will become a monopoly price, the 
highest price the market can afford to pay. In 
a cash market there will be no labor competing 
for work because the demand for goods and 
capital will be insatiable; all that labor can 
possibly produce may be sold at a profit, wages 
will therefore rise to the monopoly level and 
prices will rise to an equal monopoly level under 
the control of natural law. 

Tens of billions now a cost of land must be 
converted into higher wages. Before land value 
can change into higher wages it must become the 
value of a labor product, and by the sale of that 
product must supply more wage money, hence 
land value must first be converted into a selling 



218 NATURAL ECONOMIC LAW 

price of capital above cost before we solve the 
labor problem. 

New buildings and improvements upon land 
rimning into tens of billions of dollars must be 
so financed that they will force, what is now a 
cost for land into the selling price of an improve- 
ment upon the land. 

Applying this rule to present buildings, few 
structures have a labor cost equal to the value 
of the land under them, and a mere change 
abolishing debts would at once transfer present 
land value into a higher selling price of a building, 
where the building value was equal to the land 
value. 

In cities, most of the valuable building sites 
are encumbered with disgraceful ruins represent- 
ing a very much lower order of growth like that 
of a reptile compared with a man. This type of 
building must be replaced with new structures 
allowing each site to grow all the building its 
fertility or fecundity will supply with vital profit. 

Third Avenue, for example, in the city of New 
York from the Bowery to the Bronx, nine miles 
of business structures, has no more than a score 
of buildings that represent the fertile power of 
each site to grow capital, and such an avenue 
niust be completely reconstructed before the land 
value may change into a higher selling price of 
its buildings. 



THE WAY OUT 219 

This is just an example of one street, to illus- 
trate that New York City must be rebuilt from 
its cellars, and what applies to New York City- 
applies to every city and town, and to the country 
extending in a wide circle surrounding every city, 
to mines, and to other natural resources. 

The new building program provides the work 
and more work that will cure the ills of labor and 
capital, and in view of this enormous task it 
should not be a difficult problem to find work 
for all the labor in the world at the maximum 
limit to wages. 

■ When an estimate is made of just how present 
owners are to build beautiful buildings, on the 
site of ugly ones and receive more rent for each 
one hundred dollars spent, many difficulties arise, 
in problems of administration and finance. 

The first problem concerns the small narrow 
lots now occupied by three, four and five story 
tenements that must give way to modern steel 
and elevator buildings each of which require an 
acre of ground for the required height to give 
ample light, to give room for approaches and 
beauty of architecture. 

The owner of a small lot must not interfere 
with the greater building that will include his 
site any more than he may interfere with the 
improvement of the street in front of the building 
which is for the benefit of the property on either 
side. 



220 NATUKAL ECONOMIC LAW 

The modern street improvement was changed 
from being a private improvement in the hands 
of abutting owners into a public improvement 
over which the abutting owner had no control, 
but the abutting owners were required to pay 
for the street improvement because it increased 
the value of each property. 

In rebuilding a city the same rule must be 
followed, the owners of small lots, abutting a 
street that is tp have new buildings Une its sides, 
m-ust not determine the character of the buildings 
on their respective lots, any more than they 
determine the nature of the street improvement, 
but they must pay the cost of building because 
they will get the benefit by owning new structures 
worth two times cost. 

A city must have power to combine the small 
holdings into the site required, be it fifteen or 
twenty lots to make one building site, and then 
apportion the benefit from the new building to 
each owner like street improvement benefits are 
apportioned; to give each owner of the site his 
proportionate part of the new structure. 

The second difficulty is that about seventy-five 
per cent of new building in a city must provide 
homes for its millions who work in the central 
business districts, but who now Uve in miserable 
tenements. New homes must provide all the 
comforts modern science can give, and make 
living in the center of the city as comfortable 
for home owners as it is for guests at the hotels. 



THE WAY OUT 221 

To build modern tenements, or apartments 
successfully, each tenant will be required to pay- 
three or more times the rent an ordinary family 
is now able to pay, therefore, wages must rise 
to pay the higher rents which give conveniences 
and utilities, hot water, heating, lighting, elec- 
tricity, elevators, and the like and to do so four 
or five hundred families must be under one system 
of housing, requiring large sites and tall buildings 
surrounded, however, by ample open space. 

We inquire why wages are now too low to 
pay rents that would make billions of dollars in 
new building profitable, and we discover the fact 
that the demand for labor, from such new building 
is necessary to raise the rate, and, therefore, labor 
must now live in miserable tenements because 
his wages are low, but his wages are low because 
we persist in forcing labor to live in miserable 
tenements. 

New building must be carried on with an 
activity like preparing and prosecuting a war, 
a similar unity of plan and purpose must inspire 
a people to undertake enormous industrial prob- 
lems, to solve the labor problem and abolish 
poverty. 

How are we to find the money to anticipate its 
own return from rents and higher wages, billions 
of dollars to finance as much new building as we 
may find labor and material to build, and for 
as many years as it will take to change the old 
order into the new civilization? 



222 NA.TURAL ECONOMIC LAW 

Money to do new building must be supplied by- 
city, state or the national government, must come 
from an issue of securities based upon each 
structure, the new capital must not only provide 
for returning its own money, but also provide 
a reserve to redeem securities on demand, keeping 
them in all respects equal to bank deposits, when 
redeemed to be again sold to replenish the reserve. 

When cities were laid out and surveyed, farm 
lands were divided into building lots, and each 
small lot was expected to hold one family in a 
single home with a small front lawn and back 
garden. 

As population continued to grow from town 
to city conditions, business made demands upon 
the lots near the center of growth and it was then 
expected to keep spreading small lots into the 
country where unlimited farm lands would supply 
space for single homes for all the people. 

Central business lots sold at rapidly advancing 
prices owing to the profits collected from increas- 
ing trade and from an advancing standard of 
comfort and luxury. The small lot plan began 
to prove a burden rather than the blessing it was 
supposed to give, forcing new population to crowd 
like cattle into miserable tenements. 

The development of science and machinery, 
the building of railways connecting cities, rapid 
transit within them, all had a wonderful effect 
upon city population, it was soon evident central 



THE WAY OUT 223 

locations could no longer be spared for single 
homes, and the working population was forced 
miles into the country away from its work or into 
death breeding tenements. 

A city feeds its own population by manufactur- 
ing goods to send to the country and exchange 
for food and other supplies, it does not live by 
trading as is commonly supposed, its trade profits 
are consumed by capital, which cannot long suffer 
loss of time and money from sending its vast 
army of labor over millions of miles of useless 
travel every night and return every morning. 

To overcome the loss of labor, far from working 
places, thousands of families are crowded into 
houses built upon narrow lots, where the crowding 
deprives a family of the light and air and other 
comforts a single lot would have supplied. 

If a lot twenty-five by one hundred feet is re- 
quired for the single family in a small town then 
when city apartments rise into the air for twenty 
stories or more this unit for each family must 
be maintained, either by the design of the build- 
ing or in connection with open spaces and small 
parks adjacent. 

The change, from single dwellings for one 
family, into four, five and six story tenements 
for twenty or fifty families in crowding the popu- 
lation as a city grows is at first profitable for the 
house builder, because the lots are secured at a 
low price, but that profit, is quickly lost by the 



224 NATURAL ECONOMIC LAW 

rise in cost of land, and then such miserable 
buildings fail to house the city people. 

Every city now faces a distressing housing 
problem and must soon adopt measures to meet 
a serious condition, must destroy the present 
system of narrow tenements. The high cost of 
land does not arise from any scarcity of land in 
a city, but arises wholly from not building to the 
height each location pays for with the rent it 
collects or should collect. 

If the land on Manhattan Island, now contain- 
ing one-third the population of greater New York 
City, was built upon to its economic limit of 
sixteen floors instead of only four the gain in 
space would give room and land to waste, using 
only one-fifth the building ground. 

Steel frame elevator buildings cannot be given 
light, air, nor beauty of structure unless they have 
ample grounds, and unless each building is 
entirely separated from another. Among groups 
of every four such buildings, one equal space must 
be reserved for parking and for additional light 
and recreation ground. 

When the individual owner of a small lot may 
demand any price before ten or more lots can 
be secured for a site, he may set a wholly impos- 
sible price on his one lot and destroy all hope of 
profit from a new building, and thus a one little 
land-owning microbe stands in the way of the 
progress of a city. 



THE WAY OUT 225 

The world must solve its poverty problem by 
entering upon a vast constructive program that 
is only comparable to the enterprise of a world's 
war victoriously won, conduct an equally import- 
ant war against poverty and misery, vice and 
crime to be as victoriously won. 

Social problems will be solved after the present 
cost of land is taken away, when its weight is 
lifted from the business of the country, when 
the demand for labor will rapidly convert a 
cost of land into a maximum rate of wages after 
first changing land value into capital selling above 
its cost. Civilization comes from upbuilding the 
country and not by destroying its essential laws, 
customs and institutions, its capital or its property. 
We must move forward by work and not by vain 
talk; not by milk and water reforms which have 
no connection with the main subject. 

In every city, enormous land values are found 
under buildings that are rotten ruins, decayed 
tissue, and rows and rows of such buildings, like 
rows of rotting teeth are exposed to every sight 
seeing traveller on every street. 

One hundred, two hundred, and five hundred 
per cent is collected in rents from old shacks 
paying their cost two or more times each year, 
which shacks have been returning that cost, at 
the same rate for twenty or more years. 

Where the present building rent is fifty thou- 
sand dollars a year and a twenty thousand dollar 



226 NATURAL ECONOMIC LAW 

building is collecting that rent we have in plain 
sight a spot where a new building costing a 
million dollars will be able to collect a hundred 
thousand dollars or more in rent, and give the 
public five or more times the space for twice the 
rent. 

Natural economic law calls for rebuilding every 
great city and to have improvement extend for 
miles outside with small farms on lands now 
largely waste. 

The required margin of profit in the new work 
will come when land has no value and when 
improvements sell at two times cost; the new 
progress is not expected to succeed as a work of 
charity or benevolence. 

What is now a value of land must be included, 
absorbed and taken up by improvements selling 
at two times cost, and should an owner fail to 
so build he will lose the land value, as soon as 
the debt system is abolished, as soon as a cash 
market is established making capital as liquid 
as commodities are now. 

The great awakening must come by construc- 
tive work, by creating the greatest period of 
prosperity the world has ever seen, where the 
markets of the world will consume and will 
demand all that labor, capital and machinery 
can supply, at a profitable price. 

In the beginning, the plan of construction will 
be handicapped by the prevailing low wage ratq 



THE WAY OUT 227 

that cannot pay rents and new building must 
therefore be first confined to a class of renters 
who now have an income above the wage rate, 
and who can pay the rents on new capital which 
select locations must have. 

The plan must start along lines of least resist- 
ance, to suppty a class of capital now in demand, 
which cannot be supplied on account of land 
selling at from five to ten million dollars an acre. 

When high priced land is open to the builder 
without paying millions of advance money great 
plans for single structures will be executed where 
the required rents can be secured from present 
income, and before the wage rate will advance to 
its normal and natural level. 

Fit round pegs into round holes, by making 
every parcel of land grow the particular capital 
its location demands for different classes of whole- 
sale, retail, and manufacturing business with 
dwelhngs among them, so arranged that the 
workers will live near their work and will also 
live near centers of amusement, education and 
recreation, giving to each location its natural 
growth of capital; that is the great business of 
the coming age. 

The laboring classes are not to have homes 
built as a matter of charity and benevolence, 
cheap rents to meet low wages, for it is the last 
class in the world to need favors and privileges 
if the laws are just. Building must be undertaken 



228 NATURAL ECONOMIC LAW 

with the full understanding that the natural rate 
of wages will permit a laborer and his family to 
live where it may enjoy the luxuries and comforts 
which modern science and machinery will supply. 

The old structures first to give way on the most 
valuable locations may perhaps be best illustrated 
by two examples in the New York City, as being 
a place where the best ground with the worst 
buildings upon it may be found, in all the world. 

There are two typically disgraceful blocks in 
that city on Broadway immediately south of the 
Metropolitan Opera House fronting Broadway, 
and Seventh Avenue near the great Pennsylvania 
Railway Terminal and bounded by 37th, 38th 
and 39th Streets. 

Each of the locations is entirely surrounded 
by streets and contain a little more than an 
acre, two hundred by about three hundred feet 
and are now "improved" by low cheap one, two 
and three story buildings and two lumber yards, 
the most valuable land property in the city for 
general use. 

Under a cash plan the city would call upon 
the owner or the combined owners to present 
plans for the proper improvement of the site, 
being willing and ready to supply the cost pro- 
vided the proposed buildings are satisfactory. 
The owner failing to build the city should have 
the power to build from its own plans and charge 
the cost to the property benefited the same as 
building a street. 



THE WAY OUT 



22f9 



At this particular location we meet an impor- 
tant proposition, namely, what kind of a building 
will rent so that the cost will return in ten years, 
and it will speedily be admitted that hotels, 
department stores, theaters, office buildings are 
not to be considered at this location because 
the demand is now supplied. 

The ground floor on Broadway will give the 
first and best rent, ' and that may be readily and 
safely estimated as so many dollars per square 
foot per annum, in this case will be no less than 
fifteen dollars per square foot, three-quarters of 
a million dollars a year, for stores fronting Broad- 
way and Seventh Avenue on one acre location, 
and one story high. 

The next question to be decided is how high 
above the street the building may rise to a point 
where the rent will diminish until it is no longer 
profitable to go higher. It will be discovered that 
when rent falls from fifteen dollars a square foot 
on the ground floor to two dollars a square foot 
per annum on the upper floors the limit of eco- 
nomic height has been reached. 

In the city of greater New York, with its 
population of about six million, there are about 
one million families of working men and women 
who must depend upon a wage income, and this 
million families, or most of them, need to be 
provided with homes supplied by great apart- 
ments each having four hundred families or more. 



230 NATURAL ECONOMIC LAW 

Besides homes for the workers there must be 
a general reconstruction of business and manu- 
facturing as soon as the cost of land is eliminated 
and when finances are arranged to supply un- 
hmited money for fertile locations. 

The cost of land will go by the simple process 
of forcing the present owners to do the building, 
by not depending upon a new set of buyers to 
pay for land in advance of building; by treating 
the present owner of a mortgage as a part owner 
of the building, by exchanging the mortgage for a 
better security in a new structure, 

The moment estimates are made for housing 
the population and business of any section, using 
the land to its capacity, the surprising fact 
develops that land is not scarce and should not 
have a price. Buildings suitable to each location 
have been scarce, and the value of land came from 
a scarcity of suitable buildings and not because 
of any failures in the supply of land. 

Manhattan Island, for example, when properly 
developed, will find land as plentiful almost as 
the air, with three times as much space for other 
uses than buildings for light, parks and recreation 
grounds. 

When the sky line of buildings rises to a height 
of twenty floors on Manhattan, two thousand 
acres will house all the families that now live on 
the island with a total acreage of about 15,000, 
one-third of which is required for streets. 



THE WAY OUT 231 

Unfortunately the land reform problems have 
been treated as being almost wholly agricultural, 
to obtain farming and grazing land for actual 
cultivators, leaving out of consideration the im- 
portant lands under cities where haK the wealth 
of the world concentrates upon an insignificant 
part of its surface. 

Land reform must begin in the central districts 
and tenements of great cities, profits from land 
all over the world will mobiHze at city locations 
to create and sustain the world's wealth, and from 
cities the benefits of wealth will rapidly spread 
into the country, in wider and wider circles having 
a city as the center of consumption. 

Natural economic law demands a cash market as 
the supreme commercial reform as the foundation 
for all culture or art, science, religion and morals. 

Civilization has its end in view in a standard 
of living which is both material and spiritual 
for the survival of a man who is fit to live an 
immortal life on this earth, to live a happy and 
human life over and over, time and again. 



